Final answer:
The question from the student involves calculating the price of a bond based on its coupon rate and required rate of return. It falls under the Business subject, particularly financial management in a college setting. The calculation involves finding the present value of future cash flows from the bond.
The correct answer is A
Step-by-step explanation:
The subject of the question is the calculation of the bond's price given a certain coupon rate and a required rate of return. The question falls under the subject area of Business, specifically within the topic of financial management or investment and concerns itself with bond valuation which often appears in college-level finance courses.
To find the price of the bond, we use the present value formula for bonds, which accounts for the present value of the coupon payments and the present value of the par value.
The bond pays semiannual coupons, so we have to adjust the coupon rate and required rate of return for semiannual periods and calculate the present value of these cash flows. As interest rates have fallen below the coupon rate, this bond will sell for more than its face value.
The correct answer is A