Consider a government zero-coupon bond with a five-year maturity and an annual effective discount rate of 4%.

Which statement is correct for a five-year zero-coupon bond issued by a company, with a par value of 500?

Select one:

407.68 is a reasonable lower bound for the corporate bond price.

410.96 is a reasonable estimate for the corporate bond price.

410.96 is a reasonable upper bound for the corporate bond price. [WRONG]

4% is a reasonable lower bound for the annual effective discount rate associated with the corporate bond price.