FNCE 3001 Bonds

Assignment: Bonds In the midst of World War II, the U.S.
government began issuing defense bonds, later calling them war bonds
once the country entered the war. Although the citizens who purchased
the bonds could have received a better return on their investments
elsewhere, they took comfort in knowing that their investment would help
with their country’s war efforts and there would be a guaranteed
return. Even through the deadliest and most costly war in history,
people felt assured in the security that was provided through the
purchase of bonds. Even today, investors and organizations can rely on
the same security that bonds provide. Organizations may also consider
the option of issuing bonds in order to raise money for projects and
operations. Therefore, it is important for financial managers to
understand aspects of bonds, such as how sensitive they are to interest
rates and how some features benefit issuers, while others benefit
investors.
For this Assignment, you will answer a series of questions related to bonds.

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Submit your responses to the following prompts.
How are the price and the Yield-to-Maturity (YTM) of a bond related? (75–150 words, or 1–2 paragraphs)
What is the main reason why long-term bonds are subject to greater
interest rate risk than short-term bonds? (75–150 words, or 1–2
paragraphs)
A company is contemplating issuing a bond and is debating whether or
not to include a call provision. What are the costs? How do these
answers change for a put provision? (250–225 words, or 2–3 paragraphs)
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. (250–225 words, or 2–3
paragraphs)
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? (250–225 words, or 2–3 paragraphs)
What is the relationship between the current yield and YTM for
premium bonds, discount bonds, and bonds selling at par value? (250–225
words, or 2–3 paragraphs)