Question: 1. What is the difference between the coupon rate and the YTM? 2. How does a bond issuer decide on the coupon rate to set

1. What is the difference between the coupon rate and the YTM?

2. How does a bond issuer decide on the coupon rate to set on its bonds?

3. What is the relationship between bond prices and its YTM?

4. What is a discount bond? a premium bond?

5. All else remaining same, which has more interest rate risk, a long-term bond or a short-term bond?

6. All else remaining same, which has more interest rate risk, a low-coupon bond or a high-coupon bond?

7. A Bond is currently selling for $940 and has a coupon rate of 7%. Should the YTM be higher or lower than 7%?

8. A Bond is currently selling for $1040 and has a coupon rate of 8%. Should the YTM be higher or lower than 8%?

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