A firm issues 2-year bonds with a coupon rate of 5%, paid semiannually. The credit spread for thisfirm's 2-year debt is1.2%. New 2-year Treasury notes are being issued at par with a coupon rate of 5.4%. What should the price of thefirm's outstanding 2-year bonds be if their face value is$1000?

A.

$776.38

B.

$1,358.67

C.

$4.80

D.