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Some of my answers are incorrect I need help please . When the bond's coupon rate is equal to the bondholder's required return, the bond's
Some of my answers are incorrect I need help please
. When the bond's coupon rate is equal to the bondholder's required return, the bond's intrinsic value will equal its par value, and the bond will trade at par. . When the bond's coupon rate is greater than the bondholder's required return, the bond's intrinsic value will exceed its par value, and the bond will trade at a premium . When the bond's coupon rate is less than the bondholder's required return, the bond's intrinsic value will be less than its par value, and the bond will trade at a discount. For example, assume Ethan wants to earn a return of 14.00% and is offered the opportunity to purchase a $1,000 par value bond that pays a 12.00% coupon rate (distributed semiannually) with three years remaining to maturity. The following formula can be used to compute the bond's intrinsic value: ic Value - +C)T1+C)2 1+C 1+C)4 (1+C)5+1+C)6 + 1+C) Complete the following table by identifying the appropriate corresponding variables used in the equation. Variable Value $60.00 $1,000 7.0000% Unknown Variable Name Bond's semiannual coupon payment Bond's par value Semiannual required return Based on this equation and the data, it is easonable to expect that Ethan's potential bond investment is currently exhibiting an intrinsic value greater than $1,000 Now, consider the situation in which Ethan wants to earn a return of 10.00%, but the bond being considered for purchase offers a coupon rate of 12.00%. Again, assu me 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 $1,366 (rounded to the nearest whole dollar) is greater than its par value, so that the bond is trading at a premiumStep by Step Solution
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