A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%.The intrinsic value of the bond today will be ______ if the coupon rate is 7.5%.

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The intrinsic value of a bond can be calculated using the present value of its future cash flows, which include the annual interest payments and the principal repayment at maturity. Given a coupon rate of 7.5% on a $1,000 par value bond, the annual interest payment is $75. The bond matures in six years, and the yield to maturity is 11%. The intrinsic value (V) can be calculated as:$$ V = \frac{C}{r} \left(1 - \frac{1}{(1 + r)^n}\right) + \frac{F}{(1 + r)^n} $$Where:- $C$ is the annual coupon payment ($75),- $r$ is the yield to maturity (11% or 0.11),- $n$ is the number of years until maturity (6),- $F$ is the face value of the bond ($1,000).Plugging in the values:$$ V = \frac{75}{0.11} \left(1 - \frac{1}{(1 + 0.11)^6}\right) + \frac{1000}{(1 + 0.11)^6} $$$$ V \approx 851.93 $$Therefore, the intrinsic value of the bond today is approximately $851.93.

A Coupon Bond That Pays Interest Annually Has a Par