A 1,000 par value bond with 8% annual coupons matures at par in 4 years. The following

are given as the one-year forward rates for year n + 1 (i.e., the one-year effffective rates

during year n + 1): Scenario X and Scenario Y have an equal probability of occurring.

n Scenario X Scenario Y

0 7% 7%

1 7% 6%

2 8% 7%

3 10% 5%

Calculate the expected present value of the bond payments