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. When the bonds coupon rate is equal to the bondholders required return, the bonds intrinsic value will equal its par value, and the bond will trade at par. . When the bonds coupon rate is greater than the bondholders required return, the bonds intrinsic value will exceed its par value, and the bond will trade at a premium . When the bonds coupon rate is less than the bondholders required return, the bonds 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 bonds 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 Bonds semiannual coupon payment Bonds par value Semiannual required return Based on this equation and the data, it is easonable to expect that Ethans 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 bonds 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 premium .Some of my answers are incorrect I need help please

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Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I HAVE USED EXCEL IN CALCULATION. ALREADY DONE SUM EARLIER, SO ANSWERS ARE CORRECT. YOU WANT TABLE TO BE USED FOR CALCULATING VALUES, LET ME KNOW, WILL DO THAT ALSO IF REQUIRED. THANK YOU

Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum 11.A. A, 9- Fwap Text General Copy a-Δ ila For national Format, Stell. B l U. ㄧ˙ Merge & Center, $ , % , Insert Delete Format Format Painter Formatting as Table Styles2 Clear Clipboard CD310 BX Alignment Number Cells Edting BY BZ CA CD CE CF CG When the bonds coupon rate is greater than the bondholders required return, the bonds intrinsic value will EXCEED than its par value & the bond will trade at a premium 302 303 304 305 306 307 When the bonds coupon rate is less than the bondholders required return, the bonds intrinsic value will less than its par value & the bond will trade at a DISCOUNT 308 UNKNOWN VARIABLE NAME VARIABLE VALUE BONDS SEMI ANNUAL COUPON PAYMENT BONDS PAR VALUE SEMI ANNUAL REQUIRED RETURN 60 1,000 7.00% 309 310 311 312 313 NOTE FV 314 315 316 317 318 319 320 1000.00 12.00% SEMI ANNUALLY COUPON LIFE REQUIRED RATE PRICE OF BOND IF COUPON PAID SEMI ANNUALLY 14% $952.33 EXCEL-PV(14%)2,3*2,-120/2,-1000) Based on this equation and the data, it is NOT REASONABLE to expect that Ethans potential bond investment is currently exhibiting an intrinsic value GREATER THAN $1,000. OT Sheet2 AFN BANKİNG NOTE BIDDING, UNDERWRITING EUACA N PM LIFE LA IP MRP INFLATION YIELD WARRANT efu d bnd CLEAN IVOCE PRIE 09-01-2019. Home nert Page Layout Formulas Data Review View dd-Ins s Cut E AutoSum Wrap Text General FormatCietEditing в 1 프· ー· 鱼, Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Formsat Paste Sort &Find & Format Painter Formatting as Table Styles2 Clear Clipboard BZ336 BX Font Alignment Number Styles Cells BY BZ CA св CD CE CF CG CH 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 Based on this equation and the data, it is NOT REASONABLE to expect that Ethans 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%, but the bond being considered for purchase offers a coupon rate of 12% Again, assume that the bond pays semiannual interest payments and has three years to maturity If you round the bonds intrinsic value to the nearest whole dollar then its intrinsic value of $1051 is GREATER THAN its par value, so that the bond is AT PREMIUM 1051 EXCEL-PV(10%/2,3*2,-120/2,-1000) 334 335 336 /4 く トト1 | YIELD SPOT Sheet2. AFN PM LIFE / LP, IP, MRP, INFLATION YIELD .. WARRAN Trefund bond CLEAN INVOICE PRICE 06:54 09-01-2019

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