Question

Toxaway Telephone Company has a $1,000 par value bond outstanding that pays 6 percent annual interest. If the yield to maturity is 8 percent, and remains so over the remaining life of the bond, the bond will have the following values over time:
Remaining Maturity Bond Price
15 ................ $795.67
10 ................ $830.49
5 ............... $891.86
1 ............... $973.21
Graph the relationship in a manner similar to the bottom half of Figure 10-2. Also explain why the pattern of price change takes place.



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  • CreatedOctober 14, 2014
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