A company has a $1200 face value bond and three years to maturity. The bond carries an annual coupon of 8%. The current market price of the bond is $1050. Required: (i) (ii) (iii) What is the yield to maturity of the bond? Given a discount rate of 10%, what is the intrinsic value of the bond? Should the company hold the bond or sell it?

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.