Assume a 15-year Treasury bond has a coupon rate of 5.7%. Give examples of required rates of return that would make the bond sell at a discount, at a premium, and at par. b If this bond's par value is $1,000, calculate the differing values for this bond given the required rates you choose in part a. a. At what rate would the bond sell at a discount? (Select the best answer below.) O A. 4.8% OB. 5.7% O C. 8.8% At what rate would the bond sell at a premium? (Select the best answer below.) O A. 4.6% OB. 5.7% O C. 8.6% At what rate would the bond sell at par? (Select the best answer below.) O A. 4.6% OB. 5.7% O C. 8.696 b. If this bond's par value is $1.000 and the required rate is 8.8%, the present value of the bond is $ (Round to the nearest cent.) If this bond's par value is $1,000 and the required rate is 4.8%. the present value of the bond is (Round to the nearest cent.) If this bond's par value is $1.000 and the required rate is 5.7%, the present value of the bond is $ (Round to the nearest cent.) Click to select your answer(s).

a. A bond will sell at discount when its coupon rate is lower than the required rate. It will sell at a premium when the coupon rate is higher than the required rate. It will sell at par when the coupon rate and required rates are same.

1.C

It will sell at discount at this rate since this rate is higher than coupon.A is false since the required rate will be lower than coupon, so the bond will sell at premium. B is false since at this rate, it will sell at par.

2.A

It will sell at premium since this rate is higher than the coupon.B is false since at this rate, it will sell at par.C is false since it will sell at discount at this rate as this rate is higher than coupon.

3.B

It will sell at par at this rate as coupon=Required rate.A is false since the required rate will be lower than coupon, so the bond will sell at premium. C is false since it will sell at discount at this rate as this rate is higher than coupon.

b.

1.Price of the bond = Coupon*(1-1/(1+r)^n)/r + FV/(1+r)^n

= 5.7%*1000*(1-1/(1+8.6%)^15)/8.6% + 1000/1.086^15

= 57* 8.254613162+ 290.103268

= 760.62

2. Price of the bond = Coupon*(1-1/(1+r)^n)/r + FV/(1+r)^n

= 5.7%*1000*(1-1/(1+4.6%)^15)/4.6% + 1000/1.046^15

= 57*10.66608963+ 509.3598771

= 1117.33

3. Price of the bond = Coupon*(1-1/(1+r)^n)/r + FV/(1+r)^n

= 5.7%*1000*(1-1/(1+5.7%)^15)/5.7% + 1000/1.057^15

= 57*9.905495926+ 435.3867322

= 1000