Midland Utilities has a bond issue outstanding that has an 11 percent coupon rate. The coupons are paid semiannually. The bond issue has 12 years remaining to maturity.

1. Find the value of $1,000 of par value of the bond if the required return is: (1) 7 percent, (2) 9 percent, (3) 11 percent, (4) 13 percent, (5) 15 percent.
2. Plot your findings in a on a chart where the return is the x axis and the market value of the bond is the y axis.
3. Use your findings in a and b to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value.
4. What two reasons cause the required return to differ from the coupon interest rate?