retum, the bond's intrinsic value will equal its par value, and t bondholder's required return, the bond's intrinsic value will exceed 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 its par value, and the bond will trade at a discount For example, assume Olivia wants to earn a return of 13.50% and is offered the opportunity to purchase a $1,000 par value bond 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-++ + ++ Complete the following table by identifying the appropriate corresponding variables used in the equation. Unknown Variable Name Variable Value $56.25 $1,000 6.7500% Bond's par value Semiannual required return Based on this equation and the data, it is less than $1,000. to expect that Olivia's potential bond investment is currently exhibiting an intrinsic va Now, consider the situation in which Olivia wants to earn a return of 14%, but the 11.25%. Again, assume that the bond pays semiannual interest payments and has three the nearest whole dollar, then its intrinsic value of 934 (rounded to the nearest whole bond is bond being considered for purchase offers a coupon rate ot years to maturity. If you round the bonds ntrinsic value its par value, so that the dollar) is Given your computation and condlusions, which of the following statements is true? O When the coupon rate is greater than Olivia's required return, the bond's intrinsic value will be less than its par value. O A bond should trade at a par when the coupon rate is greater than Olivia's required return. O When the coupon rate is greater than Olivia's required return, the bond should trade at a discount. When the coupon rate is greater than Olivia's required return, the bond should trade at a premium