Given a required yield to maturity of 6%, what is the intrinsic value of a semi-annual pay coupon bond with an 8% coupon and 15 years remaining until maturity? A. $1,095. B. $1,196. C. $1,202.
This problem can be solved most easily using your financial calculator. Using semiannual payments, I = 6/2 = 3%; PMT = 80/2 = $40; N = 15 × 2 = 30; FV = $1,000; CPT → PV = $1,196.
