Question: 0 Q Block 17e Chapter 10 Problem 7 Bond Maturity Effect (L010-3) Toxaway Telephone Company has a $1.000 par value bond outstanding that pays 6

0 Q Block 17e Chapter 10 Problem 7 Bond Maturity Effect (L010-3) 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: 9 10 Remaining Maturity 15 10 5 1 Bond Price $795.67 $830.49 $891.86 $973.21 12 13 14 Graph the relationship in a manner similar to the bottom half of Figure 10-2 of the textbook. Also explain why the pattern of price change takes place. 16 6% Bond, $1,000 Par Value 17 Bond Value $1,000 18 19 20 21 900 22 23 800 24 25 Assumes 8% Yield to Maturity 26 700 27 28 30 25 15 5 0 29 30 Years 32 33 34 35 36 37

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