LONG TERM DEBT FINANCING & BOND VALUATION 1) a) 1 b) Explain if the following statements are true. The coupon rate and the required rate of return for a specific issue of bonds both vary over time as economic factors change. Regardless of the size of the coupon payment, the price of a bond moves in the opposite direction from the required rate of return movements. If the required rate of return of a bond is greater than its coupon interest rate, the market value of that bond will always be below its par value until the bond matures. c) d) A $1,000 par value bond with a $100 annual coupon payment with 5 years to maturity would sell for a premium if the market interest rates were below 9% p.a. and would sell for a discount if market interest rates were greater than 11% p.a. a) b) c) d)