LRQ Inc.bonds on July 1,2006.The bonds had a coupon rate of 5.5%,with interest paid semiannually.The face value of the bonds is $1,000 and the bonds mature on July 1,2021.What is the intrinsic value of an LRQ Corporation bond on July 1,2012 to an investor with a required return of 7%?

Question

Quizplus · Accepted Answer

The intrinsic value of the bond is calculated using the present value of future cash flows, which include the semiannual coupon payments and the face value at maturity, discounted at the investor's required return of 7% (3.5% per period for semiannual). The calculation results in an intrinsic value of approximately $901.08.

LRQ IncBonds on July 1,2006