Unknown Variable Name

A

B

C Semiannual required return

Variable Value

Based on this equation and the data, it is unreasonable grad to expect that Oliver's potential bond investment is currently exhibiting an intrinsic value greater than $$1,000.$

Now, consider the situation in which Oliver wants to earn a return of $16\mathrm{.}5\%,$ but the bond being considered for purchase offers a coupon rate of $13\mathrm{.}50\%.$ 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 $($rounded to the nearest whole dollar$)$ is $$ its par value, so that the bond is $$

Given your computation and conclusions, which of the following statements is true?

When the coupon rate is less than Oliver's required return, the intrinsic value will be greater than its par value.

When the coupon rate is less than Oliver's required return, the bond should trade at a discount.

A bond should trade at par when the coupon rate is less than Oliver's required return.

When the coupon rate is less than Oliver's required return, the bond should trade at a premium.