For example, assume Jackson wants to earn a return of 9.00% and is offered the opportunity to purchase a $1,000 par value bond that pays a 15.75% 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 = a to je + 10* + au fogar + 1 tcf* + (* + 1 toga + cu tenso Complete the following table by identifying the appropriate corresponding variables used in the equation. Unknown Variable Name Variable Value Bond's semiannual coupon payment Bond's par value $78.75 $1,000 4.5000% Semiannual required return reasonable to expect that Jackson's potential bond investment is currently exhibiting an intrinsic Based on this equation and the data, it is value greater than $1,000. Now, consider the situation in which Jackson wants to earn a return of 13.75%, but the bond being considered for purchase offers a coupon rate of 15.75%. 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? A bond should trade at a par when the coupon rate is greater than Jackson's required return. When the coupon rate is greater than Jackson's required return, the bond should trade at a premium. When the coupon rate is greater than Jackson's required return, the bond's intrinsic value will be less than its par value. When the coupon rate is greater than Jackson's required return, the bond should trade at a discount