Now, consider the situation in which Amelia wants to earn a return of $5\%$ on a $$1,000$ par value bond, but the bond being considered for purchase offers a coupon rate of $7\%.$ 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 is $-$ its par value, so that the bond is trading at

TOTAL SCORE: $\frac{4}{5}$

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