Bond value and changing required returns Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon interest rate of 11% and pays interest annually. a. Find the value of the bond if the required return is (1) 11%, (2) 15%, and (3) 8%.

b. Plot your findings in part a on a set of required return (x axis)market value of bond (y axis) axes.

c. Use your findings in parts a and b to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value.

d. On the same diagram, sketch the following three curves:

• The value of the bond vs. the number of years to maturity when the required rate of return is 8%.
• The value of the bond vs. the number of years to maturity when the required rate of return is 11%.
• The value of the bond vs. the number of years to maturity when the required rate of return is 18%.