The bonds of Copo Inc. are rated A+ and have 11 years until maturity. The bonds have a coupon rate of 4%, paid semi-annually. The bonds are rated A+.

Currently, the T-bill rate is 3%. The default risk premium associated with the Copo bonds is 50 bps, as is the liquidity premium. The maturity risk premium is 1%. The real risk-free rate is 2%.

What is the required rate of return on these Copo bonds?

3.50%

4.00%

5.00%

4.50%

Is this bond selling at a premium, at a discount, or at par?

at a discount, because interest rates have fallen since the bond was issued

at a premium, becaus interest rates have fallen since the bond was issued

at a discount, because interest rates have risen since the bond was issued

at a premium, becaus interest rates have risen since the bond was issued