The price that bonds will issue for in the market largely depend upon numerous economic factors. However, the relationship between a bond's stated coupon rate (or contract rate) and the market rate. This results in every bondholder achieving the same yield to maturity if the bond is held until it matures.

REQUIRED

please discuss this relationship between the coupon rate and the market rate by answering the following questions:

1. What is the nature of this relationship (i.e. directional, inverse, no relationship) and why is this so?
2. How does this impact bond pricing?
3. How are discounts and premiums on bonds payable accounted for?