Question 3 (20 marks) A company has a capital structure of 75% debt and 25% equity. The net income was stated as $1,000,000 and the company paid $200,000 in dividends. The company has 25,000 shares outstanding. The company had issued a bond with face value of $1,000 paying 10% coupon rate, which matures in three 3 years with a yield to maturity of 8%. The company's stock has a beta of 1.2%. It was established that the risk free rate is 6% and Market Risk premium is 4%. The company is a constant growth firm that just paid dividends of $2, selling for $12.00 per share and has a growth rate of 10%. The firm pays taxes at 40%. Required a) Explain behaviour of a bond. (3 marks) b) Define the following terms in relation to a bond