For example, assume Ella wants to eam a return of 6.00% and is offered the opportunity to purchase a $1.000 par value bond that pays a 10.50% coupon rate (distributed semiannually with three years remaining to maturity. The following formula can be used to compute the band's intrinsic value: e + + . 11.0 wnictwie Complete the following table by identifying the appropriate corresponding variables used in the equation Variable Value Unknown Variable Name A B $1,000 Semiannual coupon payment Semiannual required return C to expect that Ella's potential bond investment is currently exhibiting an intrinsic value Based on this equation and the data, it is greater than $1,000 Now, consider the situation in which Ella wants to earn a return of 7.50%, but the bond being considered for purchase offers a coupon rate of 10.50%. 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 greater than Ella's required return, the bond should trade at a discount When the coupon rate is greater than Ella's required return, the bond should trade at a premium. A bond should trade at par when the coupon rate is greater than Ella's required retum. When the coupon rate is greater than Ella's required return, the band's intrinsic value will be less than its par value. What will happen to the price of a fixed-rate bond when expectations for inflation rise? The bond price will rise. O The bond price will fall