What is the intrinsic value of bond

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Problem: Verizon bond with an October 2025 maturity, a 5.15% coupon bond (paid semi-annually), and a current selling price of $1135.55.

1. Assuming that bonds with similar risk are priced using a 3% annual discount rate, what is the intrinsic value of this bond?

2. According to the intrinsic value of the bond from above question, is the market price of the bond overvalued or undervalued?

3. Assuming that nothing changes, what will be the intrinsic value of this bond in one year?

4. If you buy this bond today at the intrinsic value found in Q1, and you sell it one year later at your intrinsic value found in Q2, what will be your total return (in %)?

Reference no: EM132420728

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