Final answer:
To calculate the price of the bond, we need to use the concept of present value. The bond will pay $80 every year for 8 years. The yield-to-maturity is 7.7%. The price of the bond is approximately $1,007.44.
Step-by-step explanation:
To calculate the price of the bond, we need to use the concept of present value. The bond will pay $80 every year for 8 years. The yield-to-maturity is 7.7%. We can use the formula for the present value of a bond to calculate the price:
PV = C × (1 - (1 + r)^-n) / r + F / (1 + r)^n
Where PV is the present value or price of the bond, C is the coupon payment, r is the yield-to-maturity, n is the number of years, and F is the face value. Plugging in the values:
PV = 80 × (1 - (1 + 0.077)^-8) / 0.077 + 1000 / (1 + 0.077)^8
Using a calculator or spreadsheet, the price of the bond is approximately $1,007.44.