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Ch 04: Assignment - Bonds Valuation coupon rate (distributed semiannually) with three years remaining to maturity. The following formula can be used to computer the
Ch 04: Assignment - Bonds Valuation coupon rate (distributed semiannually) with three years remaining to maturity. The following formula can be used to computer the band's intrinsic value: Intrinsic Value = + f (1+ + (ch (1) CY 11. (1. Complete the following table by identifying the appropriate corresponding variables used in the equation. Unknown Variable Name Bond's semiannual coupon payment Bond's par value Semiannual required return Variable Value $120.00 $1,000 5.2500% Based on this equation and the data, it is unreasonable to expect that Tesla's potential bond investment is currently exhibiting an intrinsic value less than $1,000 Now, consider the stuntion in which Testa wants to earn a return of 15%, but the bond being considered for purchase offers a coupon rate of 12.00% 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 (rounded to the nearest whole dollar) Its par value, so that the bond Given your computation and conclusions, which of the following statements is true? A bond should trade at par when the coupon rate is greater than Tesfa's required return. When the coupon rate is greater than Testa's required return, the bond's intrinsic value will be less than its par value. When the coupon rate is greater than Testa's required return, the bond should trade at a premium When the coupon rate is greater than Tesfa's required return, the bond should trade at a discount
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