Answer:
$1,015.89
Explanation:
Annual coupon = 1000*8.6% =86
Present value of annuity = Annuity[1-(1+interest rate)^-time period]/rate
= 86*[1-(1.082)^-5]/0.082
= 86*3.971751714
Present value of discounting factor=1000/1.082^5
= 674.316359
= 1000*0.674316359
Price of bond = Annual coupon*Present value of annuity factor(8.2%,5) + $1000*Present value of discounting factor(8.2%,5)
Price of bond = 86*3.971751714 + $1000*0.674316359
Price of bond = 341.570647404 + 674.316359
Price of bond = 1015.887006404
Price of bond = $1,015.89
