A one-year, $1000 par value corporate bond has a coupon rate of 8% (paid semiannually). The real rate of interest is 2%. This years inflation rate was 2% and it is expected to increase to 3% over the coming year. The default risk premium on similar corporate bonds is 2%. This bond's price (fair value) is:

A. $990.64

B. $1000.00

C. $1009.50

D. Not possible to determine from the information given

I'm pretty sure it is C, I just do not know how to calculate it.