Required:

a. State all assumptions needed to value the bond using given information.b. Estimate the intrinsic value of the bond.

Problem 3. You have been asked to estimate the value of a 3-year bond with a coupon that will be low initially but it is expected to grow later in the band's life. The coupon is expected to be 5% of the face value of the bond (which is $ 1000) for the first year, and will increase by 1% each year for the second (6%) and third year (7%). Unfortunately such bonds are not traded on the market, but on could observe four other bonds traded: -___ ____ [_____ Required: a. State all assumptions needed to value the bond using given information. b. Estimate the intrinsic value of the bond