pay, and a bondholder's required return Remember, a bond's coupon rate partially determines the interest-based return that a bond will reflects the return that a bondholder would like to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond's coupon rate, the bondholder's required return, the bond's par value, and its intrinsic value. These relationships can be summarized as follows: . When the bond's coupon rate is equal to the bondholder's required return, the bond's intrinsic value will equal its par value, and the bond will trade at par. When the bond's coupon rate is greater than the bondholder's required return, the bond's intrinsic value will exceed its par value, and the bond will trade at a premium. When the bond's coupon rate is less than the bondholder's required return, the bond's intrinsic value will be less than its par value, and the bond will trade at a discount For example, assume Oliver wants to earn a return of 15.75% and is offered the opportunity to purchase a $1,000 par value bond that pays a 13.50% coupon rate (distributed semiannually) with three years remaining to maturity. The following formula can be used to compute the bond's intrinsic value: Intrinsic Value = (tot + otfrogz + frego + cm + otros + + vetrom Complete the following table by identifying the appropriate corresponding variables used in the equation. Unknown Variable Name Bond's semiannual coupon payment Variable Value $67.50 $1,000 7.8750% Bond's par value Semiannual required return to expect that Oliver's potential bond investment is currently exhibiting an intrinsic Based on this equation and the data, it is unreasonable value greater than $1,000. Now, consider the situation in which Oliver wants to earn a return of 16.5%, but the band being considered for purchase offers a coupon rate of 13.50%. Again, assume that the bond pays semiannual interest payments and has three years to maturity. If you round the band's intrinsic value to the nearest whole dollar, then its intrinsic value of $1,210 (rounded to the nearest whole dollar) is less than its par value, so that the bond is trading at a discount , Given your computation and conclusions, 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. When the coupon rate is greater than Oliver's required return, the bond's intrinsic value will be less than its par value. When the coupon rate is greater than Oliver's required return, the bond should trade at a discount. A bond should trade at a par when the coupon rate is greater than Oliver's required return