You are considering investing in a BBB-rated corporate bond with a 10-year maturity and a 5% coupon rate (with annual coupons). Assuming that the bond rating is appropriate given the default risk of the company, that the risk free rate is 2% and the default spread for BBB rated corporate bonds is 3%, which of the following would you expect to see as the price of the bond?

a.

The bond should trade at par.

b.

The bond should trade at a premium.

c.

The bond should trade at a discount.

d.

Impossible to tell without more information.

e.

Bond should trade at 120%.