Question

assume that bunch inc. has an issue of 18-year $1,000 par value bonds that pay 7% interest, annually. further assume that today's required rate of return on these bonds is 5%. how much would these bonds sell for today? group of answer choices $1,134.88 $1,032.56 $1,201.32 $1,233.79

Answer 1

$1,233.79 was these bonds sell for today or Present value of Bonds = $1,233.79.

How to calculate Present value?

Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Present value takes the future value and applies a discount rate or the interest rate that could be earned if invested.

To calculate present value,

Future value (FV) = $1,000

Interest = 7%

So, Payment (PMT) = $1,000 × 7% = $70

Rate of return (rate) = 5%

Time period (N per) = 18 years

present value = PV = FV/(1+i)^n

Present value of Bonds = $1,233.79

To know more about present value, refer:

brainly.com/question/17322936

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