Roadside Markets has 8.45 percent coupon bonds outstanding that mature in 10.5 years. The bonds pay interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 7.2 percent?

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The market price of a bond can be calculated using the formula for the present value of an annuity (for the semiannual interest payments) plus the present value of a lump sum (for the face value of the bond at maturity). Given a 8.45% annual coupon rate, a $1,000 face value, a yield to maturity (YTM) of 7.2% annually, and a maturity of 10.5 years, the calculation is as follows:- Semiannual coupon payment = 0.0845 * $1,000 / 2 = $42.25- Semiannual YTM = 0.072 / 2 = 0.036- Number of semiannual periods = 10.5 * 2 = 21Using the present value formula for an annuity for the coupon payments:PV of annuity = C * [(1 - (1 + r)^-n) / r]= $42.25 * [(1 - (1 + 0.036)^-21) / 0.036]= $42.25 * 15.6745= $662.40 (approximately)And the present value of the lump sum for the face value:PV of lump sum = F / (1 + r)^n= $1,000 / (1 + 0.036)^21= $428.60 (approximately)Adding these two components gives the market price of the bond:Market price = $662.40 + $428.60 = $1,091.00Therefore, the correct answer is D, $1,091.00.

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