Posted: March 23rd, 2017
Bond value and time: Constant required returns Pecos Manufacturing has just issued
a 15-year, 12% coupon interest rate, $1,000-par bond that pays interest annually.
The required return is currently 14%, and the company is certain it will remain
at 14% until the bond matures in 15 years.
value of the bond with (1) 15 years, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3
years, and (6) 1 year to maturity.
(y axis)” axes constructed similarly to Figure 6.5 on page 252.
interest rate and is assumed to be constant to maturity, what happens to the
bond value as time moves toward maturity? Explain in light of the graph in
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