briefly compare the coupon rate and the interest rate regarding bonds. What is a par value?Describe the impact of a tax shield on fixed income yields.

Coupon Rate vs Interest Rate: The coupon rate refers to the annual coupon payments made by the issuer relative to the bond's face or par value. It is the yield the bond paid on its issue date. On the other hand, the interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. In the context of bonds, the interest rate often refers to the yield to maturity (YTM), which is the total return anticipated on a bond if it is held until it matures.

Par Value: The par value of a bond is the amount that the issuer agrees to repay the bondholder when the bond matures. It is also known as the face value or nominal value. Most commonly, bonds have a par value of $1000.

Tax Shield Impact on Fixed Income Yields: A tax shield is a reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as mortgage interest, medical expenses, charitable donations, amortization, and depreciation. These deductions reduce the overall taxable income. In the context of fixed income yields, the interest income from these investments is often taxed at a lower rate, providing a tax shield that can increase the overall yield for the investor. For example, if a bond yields 5% and the investor's tax rate is 30%, the after-tax yield is 3.5%. However, if the bond's interest is tax-exempt, the investor gets to keep the full 5% yield.