Caldwell, Inc. sold an issue of 30-year, $1,000 par value bonds to the public. The bonds carry a 10.85% coupon rate and pay interest semiannually. It is now 12 years later. The current market rate of interest on the Caldwell bonds is 8.45%. What is the current market price (intrinsic value) of the bonds? Round off to the nearest $1.

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The correct answer is C.The current market price of the bonds can be calculated using the present value formula:PV = C * [1 - (1 + r/2)^(-n*2)] / (r/2) + FV / (1 + r/2)^(-n*2)where:PV = present valueC = coupon paymentr = current market rate of interestn = number of years to maturityFV = face valuePlugging in the given values, we get:PV = 108.5 * [1 - (1 + 0.0845/2)^(-(30-12)*2)] / (0.0845/2) + 1000 / (1 + 0.0845/2)^(-(30-12)*2)PV = 108.5 * [1 - (1.04225)^(-36)] / 0.04225 + 1000 / (1.04225)^(-36)PV = 108.5 * 22.363 + 1000 / 10.4225PV = 2423.11 + 95.95PV = $1,220