KIC, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent and 20 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate on the bonds will be either 12 percent or 4 percent with equal probability. Assume investors are risk-neutral.

a. If the bonds are noncallable, what is the price of the bonds today? Assume a par value of $1,000 and semiannual payments.

I like to use excel to solve. This is what I keep getting, but the answer is wrong. I need help:

If interest rates are 12%: -PV (12%/2, (20-2)*2, 8%/2, 1000) = 707.58

If interest rates are 4%: -PV (4%/2, (20-2)*2, 8%/2, 1000) = 1509.78

(707.58*.5) + (1509.78*.5)/1.071225 = 1034.96