Question: Cuinn Electric Company has outstanding a bond issue that will mature to its 1,000 dollar par value in 12 years. The bond has a coupon rate of 15 percent and pays the interest yearly.
[A] Determine the value of the bond if the required return is [a] 10%, [b] 15% & [c] 17%.
[B] Use your findings in part A] to argue the relationship between coupon interest rate on a bond and the required return & the market value of the bond relative to its par value.
[C] Discuss the two reasons cause the required return to differ from the coupon interest rate?