Value of a three-year bond with quarterly coupons

A bond with face value $1000 matures in three years and pays a coupon of $2\%$ of face every quarter. The market rate is $5\%$ per year, applied as $1.25\%$ per quarter. What is the bond worth, to the nearest cent?

About $1083.09. There are $12$ quarterly coupons of $20 discounted at $1.25\%$: they are worth about $20\cdot\frac{1-1.0125^{-12}}{0.0125}\approx221.59$, and the face repayment $1000/1.0125^{12}\approx861.51$. The $8\%$ annual coupon exceeds the $5\%$ yield, so it trades at a premium.