Question: How does a company that issues a bond decide on the appropriate coupon rate to set? Explain the difference between the coupon rate and the

  • How does a company that issues a bond decide on the appropriate coupon rate to set? Explain the difference between the coupon rate and the required rate of return on the bond.
  • Explain why some bonds sell at a premium over their par value while other bonds sell at a discount. Also discuss the relationship between the coupon rate and the YTM for premium bonds. What about for discount bonds and bonds selling at par value?
  • What is the relationship between the current yield and YTM for premium bonds, discount bonds, and bonds selling at par value?

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