Jim Busby calls his broker to inquire about purchasing a bond of Disk Storage Systems. His broker quotes a price of $1,180. Jim is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 12 percent interest, and it has 16 years remaining until maturity. The current yield to maturity on similar bonds is 10 percent.
a. Calculate the present value of the bond.
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