Final answer:
To calculate the present worth value of the bond, we need to discount the future cash flows using the interest rate. In this case, the bond pays dividends of $110 at the end of each year and matures in 20 years. The approximate present worth value of the bond is $852.01.
Step-by-step explanation:
To calculate the present worth value of the bond, we need to discount the future cash flows using the interest rate. In this case, the bond pays dividends of $110 at the end of each year and matures in 20 years. The interest rate is 12% per year, compounded annually.
We can use the present value formula to calculate the present worth value:
PV = C/(1+r)^n
Where PV is the present worth value, C is the cash flow, r is the interest rate, and n is the number of periods.
Applying the formula, we get:
PV = 110/(1+0.12)^1 + 110/(1+0.12)^2 + ... + 110/(1+0.12)^20
By evaluating this expression, we find that the approximate present worth value of the bond is $852.01.