Calculate the premium or discount on the sale of a 25-year, $1,000 Province of Quebec bond that was issued 16 years ago with a coupon rate of 6% and is trading today at a yield rate of 8.5% (compounded semiannually).

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To find the premium or discount, we first calculate the bond's current price and compare it to its face value ($1,000). Given that the bond has 9 years left until maturity (25 - 16 = 9), a coupon rate of 6% (which means a semiannual coupon payment of $30, since 6% of $1,000 is $60, and bonds typically pay semiannually), and a market yield of 8.5% compounded semiannually (or 4.25% per period), we can calculate the bond's price using the present value of an annuity formula for the coupons and the present value formula for the face value.The bond's price = Present value of coupons + Present value of face value= ($30 / 0.0425) * [1 - (1 / (1 + 0.0425)^(2*9))] + $1,000 / (1 + 0.0425)^(2*9)Calculating this gives a value less than $1,000, indicating a discount. The exact calculation requires a financial calculator or spreadsheet, but the correct answer based on the options provided is a discount, not a premium, and the closest to the calculations would be option D, $155.07 Discount.

Calculate the Premium or Discount on the Sale of a 25-Year