Problem:
Morgan Robbins, a private investor, would like to purchase a bond that has a par value of $1,000, pays $80 at the end of each year in coupon payments, and has 10 years remaining until maturity.
Required:
Question: If the prevailing annualized yield on other bonds with similar characteristics is 6 percent, how much will Mr. Robbins pay for the bond?
A) $1,000.00
B) $1,147.20
C) $856.80
D) none of these
Note: Show supporting computations in good form.