Question: Why corporations prefer debt financing?
Answer: One reason that debt financing is quite popular with corporations is that the interest payments are tax-deductible expenses. As a result, the true after-tax cost of debt to a profitable firm is usually much less than the stated coupon interest rate.
Question: What is the relation with higher coupon and bond price volatility?
Answer: If coupon’s size is high it influences the volatility of the bond’s price: The larger the coupon, the less the price will change in response to a change in market interest rates. Hence, coupon has opposite effects on the price volatility of a bond.
Question: What all the names by which you refer Principal value of a bond?
Answer: Bond’s principal value is also referred as , par value, or face value of a bond. Which is the amount to be repaid to the investor either at maturity or at those times when the bond is called or retired according to a repayment schedule or sinking-fund provisions.
Question: How coupon and principal are related?
Answer: Both principal and coupon are related, because par value is the basis on which the coupon or periodic interest rests. The coupon is the product of the principal and the coupon rate.