K Corporation's Class Semi bonds have a 12-year maturity and an 8.75% coupon paid semiannually selling at par. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell?

1. Make sure to state your assumptions and thinking. If you don't I will not give you full credit.

2. Make sure to show me all the calculations. If the answer seems too simple maybe you should re-think the solution.