BioMax Inc. offers a 10 percent coupon bond that has a $1,000 par value, semiannual coupon payments and 20 years of its original 25 years left to maturity. Which of the following statements is true if the market return on similar bonds is 8.5%?
a. The bond will sell at a premium of $1,143 because the coupon rate is less than the market interest rate.
b. The bond will sell at a discount of $871 because the coupon rate is greater than the market interest rate.
c. The bond will sell at a premium of $1,143 because the coupon rate is greater than market interest rate.
d. The bond will sell at a discount of $871 because the coupon rate is less than the market interest rate.