Explanation : Using a financial calculator, compute the present value as:
N = 3 * 4 = 12, I/Y = 5/4 = 1.25%, PMT = 6/4 = 1.5, and FV =100,
CPT PV = ($102.76).
Since the coupon rate is higher than the market rate, the bond is trading at
a premium.
Explanation : A bond is priced at premium when the coupon rate is greater than the market
discount rate. A bond is priced at discount when the coupon rate is less than
the market discount rate.
Explanation : If coupon rate is equal to market discount rate, the bond is priced at par. If
coupon rate is more than the market discount rate, the bond is priced at a
premium. If coupon rate is less than the market discount rate, the bond is
priced at discount.