Microgates Industries Case Study
1. How does a bond issuer decide on the appropriate coupon rate to set on its bond? Explain the difference between the coupon rate and the required return on a bond.
A required rate of return is the figure needed to induce investors or companies to invest in something. A coupon rate describes is the amount of interest paid per year expressed as a percentage of the face value of the bond. It is the interest rate that a bond issuer pays to a bondholder. The bond issuer decides on an attractive return rate that would entice investors.
2. A Microgates Industries bond has a 10% coupon rate and a $1,000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12% yield, what’s the bond’s value? What
A required rate of return is the figure needed to induce investors or companies to invest in something. A coupon rate describes is the amount of interest paid per year expressed as a percentage of the face value of the bond. It is the interest rate that a bond issuer pays to a bondholder. The bond issuer decides on an attractive return rate that would entice investors.
2. A Microgates Industries bond has a 10% coupon rate and a $1,000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12% yield, what’s the bond’s value? What