19. Suppose a seven-year, $1,000 bond with aa 7.5% coupon rate and semiannual coupons is trading with a yield to maturity of 6.44%.

a. Is this bond currently trading at a discount, at par, or at a premium? (multiple choice)

b. If the yield to maturity of the bond rises t0 12% (APR with semiannual compounding), what price will the bond trade for?

MULTIPLE CHOICE FOR PART A.:

A.

Because the yield to maturity is greater than the coupon rate, the bond is trading at par.

B.

Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.

C.

Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.

D.

Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium.