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answer options for the chart: A) Variable Name: semi annual coupon payment, annual coupon payment, or market price Variable Value: 84.38, 225.00, 56.25, or 28.13
answer options for the chart:
A) Variable Name: semi annual coupon payment, annual coupon payment, or market price Variable Value: 84.38, 225.00, 56.25, or 28.13
B) Variable Name: annual coupon payment, par value, or market price
C) Variable Value: 9.2500%, 3.8125%, 6.7500%, and 6.5000%
first blank: reasonable or unreasonable
second blank: $1,121, $747, $1,214, or $934
third blank: equal to, greater than, or less than
fourth blank: trading at par, trading at a discount, or trading at a premium
For example, assume Noah wants to earn a return of 13.50% and is offered the opportunity to purchase a $1,000 par value bond that pays a 11.25% 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 + (1+C)2 + (1C)2 + (ifco + (If cis + + (1+ (1+C) (1+C)6 B (1+C)6 Complete the following table by identifying the appropriate corresponding variables used in the equation. Unknown Variable Name Variable Value A Bond's semiannual coupon payment B $1,000 Semiannual required return to expect that Noah's potential bond investment is currently exhibiting an intrinsic value Based on this equation and the data, it is less than $1,000. Now, consider the situation in which Noah wants to earn a return of 14%, but the bond being considered for purchase offers a coupon rate of 11.25%. 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 greater than Noah's required return, the bond's intrinsic value will be less than its par value. When the coupon rate is greater than Noah's required return, the bond should trade at a discount. A bond should trade at a par when the coupon rate is greater than Noah's required return. When the coupon rate is greater than Noah's required return, the bond should trade at a premiumStep by Step Solution
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