Now, consider the situation in which Jackson wants to earn a return of 14%, 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 _____ a. $917 b. $1,100 c. $1,192 d. $642 (rounded to the nearest whole dollar) is ______ a. less than b. equal to c. greater than its par value, so that the bond is __________________a. trading at a premium b. trading at par c. trading at a discount.

Given your computation and conclusions, which of the following statements is true?

1. When the coupon rate is greater than Jackson's required return, the bond should trade at a premium.

2. When the coupon rate is greater than Jackson's required return, the bond should trade at a discount.

3. When the coupon rate is greater than Jackson's required return, the bond's intrinsic value will be less than its par value.

4. A bond should trade at a par when the coupon rate is greater than Jackson's required return.