Now, consider the situation in which Amelia wants to earn a return of 11%, but the bond being considered for purchase offers a coupon rate of 8%. 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 .
Given your computation and conclusions, which of the following statements is true?
When the coupon rate is less than Amelia’s required return, the bond should trade at a discount.
When the coupon rate is greater than Amelia’s required return, the bond’s intrinsic value will be less than its par value.
A bond should trade at a par when the coupon rate is greater than Amelia’s required return.
When the coupon rate is less than Amelia’s required return, the bond should trade at a premium.
