Now, consider the situation in which Olivia wants to earn a return of 3.00%, but the bond being considered for purchase offers a coupon rate of 6.00%. 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 (rounded to the nearest whole dollar) is its par value, so that the bond is

Intrinsic value = $1085.87

Explanation:

Annual Rate of return = 3.00%

Annual Coupon rate  = 6.00%

Now, consider the situation in which Olivia wants to earn a return of 3.00%, but the bond being considered for purchase offers a coupon rate of 6.00%. 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 $1085.87 (rounded to the nearest whole dollar) is HIGHER THAN its par value, so that the bond is TRADING AT PREMIUM

Intrinsic value =

= 30/ (1.015) + 30/(1.015)^2 + -------  + 30/ (1.015)^6 + 1000/(1.015)^6

= 29.56 + 30/1.030 + 30/1.046 + 30/1.061 + 30/1.077 + 30/1.093 + 1000/1.093

= 29.56 + 29.126 + 28.68 + 28.275 + 27.855 + 27.447 = $170.96 + $914.91

= $1085.87

Bond's par value = $1000

annual coupon rate = 6% = 0.06

semiannual coupon rate = 3% = 0.03

semiannual coupon ( A ) = 0.03 * $1000 = $30

Annual rate of return = 3% = 0.03

semi-annual rate of return ( C )= 1.5% = 0.015  

answer is i don't know

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi