Assume that a bond makes 10 equal annual payments of

$1,000starting one year from today.

The bond will make an additional payment of

$100,000at the end of the last year, year 10.

(This security is sometimes referred to as a coupon bond.)

If the discount rate is

3.5%per annum, what is the current price of the bond?

(Hint: Recognize that this bond can be viewed as two cash flow streams: (1) a 10-year annuity with annual payments of

$1,000, and (2) a single cash flow of

$100,000arriving 10 years from today. Apply the tools you've learned to value both cash flow streams separately and then add.)