Unknown A: \"Variable Value\"( $135.00 , $45.00, $180.00 or $90.00) Unknown C :

ID: 2580729 • Letter: U

Question

Unknown A: "Variable Value"( $135.00 , $45.00, $180.00 or $90.00)
Unknown C : "variable Value" (3.8125% , 7.8750% , 92500% or 5.7525% )
"Then its intrinsic value of" ( $749, $1,217 , $936 or $655)
"(Rounded to the nearest whole dollar ) is" (greater than, less than or equal to )
"Its par value, so that the is bond" (Trading at a premium, trading at a discount or trading at par ) Unknown A: "Variable Value"( $135.00 , $45.00, $180.00 or $90.00)
Unknown C : "variable Value" (3.8125% , 7.8750% , 92500% or 5.7525% )
"Then its intrinsic value of" ( $749, $1,217 , $936 or $655)
"(Rounded to the nearest whole dollar ) is" (greater than, less than or equal to )
"Its par value, so that the is bond" (Trading at a premium, trading at a discount or trading at par )

intrinsic value: $1,000 18.00%. Again, assume that the bond pays semiannual interest payments and has three years to maturity. If you round the bond's intrinsic value to the nearest whole dollar, then its intrinsic value of bond is (rounded to the nearest whole dollar) is Given your computation and condlusions, which of the following statements is true? when the coupon rate is greater than Oliver's required return, the bond should trade at a premium. O When the coupon rate is greater than Oliver's required return, the bond should trade at a discount.

Explanation / Answer

bonds semiannual coupon payment

1000*9%

bond par value

1000

semiannual required return

Half of required return which is missing in the question

value of bond

interest*PVAF at 10.5% for 6 semiannual period + face value*PVF at 10.5% at 6th semiannual period

90*4.2921 +1000*.5493

936

PVAF at 10.5%

1-(1+r)^n -1

1-(1.105)^-6 / .105

4.2921

PVF at 10.5% at 6th semiannual period

1/(1.105)^6

0.54932116

less than par value

trading at discount

answer is option 3