Face value= future value= $1,000
Time= 2 years
Coupon rate= 6%
Coupon payment= 0.06*1,000= $60
Yield to maturity= 10%
The intrinsic value of the bond is calculated by computing the present value.
Enter the below in a financial calculator to compute the present value:
Press the CPT key and PV to compute the present value.
The value obtained is 930.58.
Therefore, the intrinsic value of the bond is $930.58.
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