What happens to the bond value as time moves toward maturity

Assignment Help Finance Basics

Reference no: EM131112045

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.

a. Assuming that the required return does remain at 14% until maturity, find the 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.

b. Plot your findings on a set of "time to maturity (x axis)-market value of bond (y axis)" axes constructed similarly to Figure 6.5 on page 246.

c. All else remaining the same, when the required return differs from the coupon 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 part b.

Reference no: EM131112045

Questions Cloud

Her description of their romance differ : Heloise's goal in this first letter is to induce Abelard to write back to her. She states that, since they both took religious orders and retired from the world, he has been silent and she longs for letters which are the closest she can get to be..

Determining the internal rate of return : Define the term "internal rate of return". Assume an investment of $50,000 with an expected return of $15,000 per year for 5 years. What is the approximate internal rate of return?

Characterized as using a dysphemism : Euphemisms and dysphemisms are different but they're usually used for the same goal: to color the audience's opinion about something by talking about it differently.Which of the following would be best characterized as using a dysphemism?

Why you would choose one design over the other : Consider the deck to be simply supported onstringers. Floor beams then transmit the load to the bottom joints of the truss. In each case find themember subjected to the largest tension and largest compression load and suggest why you wouldchoose o..

What happens to the bond value as time moves toward maturity : All else remaining the same, when the required return differs from the coupon 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 part b.

Analyze the strategies that pink employs : least a two page, double spaced, written response, analyze the strategies that Pink employs to make his argument persuasive, and analyze how he appeals to his audience based upon the use of those strategies.

Behavior of movie audiences : According to scholars, what is one way the advent of talking pictures changed the behavior of movie audiences?

Develop the matlab code to simulate : 1. Consider the block diagram below of a simple AM radio. Develop the Matlab code to simulate this system where: X(t) is a rectangle (square wave) signal with 5 cycles with a period of 12 W(t) is a low pass filter with an impulse response h(t) = e"..

What are the key elments of your companys value chain : Avoid offering perspectives that you cannot substantiate through the reading, outside research, or personal professional experience

User Account

All Pages