The bonds of Micromachines have an 8% annual coupon, face value of $1000, and mature in four years. Bonds of equivalent risk yield 12%. The company is having cash flow problems and has asked its bondholders to accept the following deal: The firm would like to make the next 2 coupon payments at half the scheduled amount, and make up for this by adding $80 to the final coupon payment. If the company goes ahead with this plan what will be the new price of the bond?.

Choose the answer that is the closest to correct.

A. $878. B. $1,031. C. $861. D. $675. E. $984