A bond with face value ₹1,000 pays a 6% coupon yearly and is repaid in 2 years. Buyers require 8% a year. What is it worth? (Take $\frac{1}{1.08} = 0.9259$ and $\frac{1}{(1.08)^{2}} = 0.8573$.)

Explanation

1. 01

   Year 1: ₹60; year 2: $60 + 1{,}000 = 1{,}060$.

2. 02

   Value $= 60 \times 0.9259 + 1{,}060 \times 0.8573 = 55.554 + 908.738 = 964.292$, about ₹964.29, a discount.