Colby & Company bonds pay semi-annual interest of $50.They mature in 15 years and have a par value of $1000.The market rate of interest is 8%.The market value of Colby bonds is (round to the nearest dollar)[blank].

Question

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The correct answer is A. The market value of Colby bonds is $1173.The bond's price can be calculated using the present value formula:PV = C * [1 - (1 + r)^-n] / r + FV / (1 + r)^nwhere:PV is the present value of the bondC is the semi-annual coupon paymentr is the semi-annual market rate of interestn is the number of semi-annual periods to maturityFV is the face value of the bondIn this case, we have:C = $50r = 8% / 2 = 4%n = 15 * 2 = 30FV = $1000Plugging these values into the formula, we get:PV = $50 * [1 - (1 + 0.04)^-30] / 0.04 + $1000 / (1 + 0.04)^30PV = $50 * [1 - 0.2330] / 0.04 + $1000 / 2.1911PV = $50 * 0.7670 / 0.04 + $1000 / 2.1911PV = $958.75 + $456.52PV = $1173.27Rounding to the nearest dollar, the market value of Colby bonds is $1173.

Colby & Company Bonds Pay Semi-Annual Interest of $50