The fair price for these bonds would be approximately $926.88.
To determine the fair price for these bonds, we need to calculate the present value of the future cash flows. In this case, the bond has a 20-year maturity, with annual coupon payments of $40 (4% of $1,000). Assuming a 4% discount rate (return), we can use the present value formula to calculate the fair price:
PV = C / r * (1 - (1 / (1 + r)^n)) + M / (1 + r)^n
Where PV is the present value, C is the annual coupon payment, r is the discount rate, n is the number of years, and M is the par value. Plugging in the values for this bond, we find:
PV = $40 / 0.04 * (1 - (1 / (1.04)^20)) + $1,000 / (1.04)^20
After evaluating this expression, we find the fair price for these bonds to be approximately $926.88.