The bonds of Copo Inc. are rated A+ and have 11 years until maturity. The bonds have a coupon rate of 4%, paid semi-annually. The bonds are rated A+.
Currently, the T-bill rate is 3%. The default risk premium associated with the Copo bonds is 50 bps, as is the liquidity premium. The maturity risk premium is 1%. The real risk-free rate is 2%.
What is the required rate of return on these Copo bonds?
3.50%
4.00%
5.00%
4.50%
Is this bond selling at a premium, at a discount, or at par?
at a discount, because interest rates have fallen since the bond was issued
at a premium, becaus interest rates have fallen since the bond was issued
at a discount, because interest rates have risen since the bond was issued
at a premium, becaus interest rates have risen since the bond was issued