2. A shipping company sold an issue of 12-year $1,000 par bonds to build new ships. The bonds pay 4.85% interest, semiannually. Today's required rate of return is 9.7%. How much should these bonds sell for today? Round off to the nearest $1.

Required to show the following 3 steps for this problem:

(i) Describe and interpret the assumptions related to the problem.

(ii) Apply the appropriate mathematical model to solve the problem. Describing the breakdown of what each variable does for the problem.

(iii) Calculate the correct solution to the problem.