Bond Intrinsic Value Calculation

Very Hard Fixed Income Valuation Discounted Cash Flow

Consider a bond that has a face value of $1,000, an annual coupon rate of 8%, and matures in 5 years. The bond pays interest annually. Currently, comparable bonds in the market yield 6%.

To find the intrinsic value of this bond using the discounted cash flow (DCF) method, you need to calculate the present value of the future cash flows, which include the annual coupon payments and the face value at maturity.