Bond prices and maturity dates. Les Company is about to issue a bond with semiannual coupon payments, an annual coupon rate of 9%, and a par value of $5,000 The yield to maturity, for this bond is 6%. a. What is the price of the bond if it matures in 10, 15, 20, or 25 years? b. What do you notice about the price of the bond in relationship to the maturity, of the bond? a. What is the price of the bond if it matures in 10 years? (Round to the nearest cent.) What is the price of the bond if it matures in 15 years? (Round to the nearest cent.) What is the price of the bond if it matures in 20 years? (Round to the nearest cent.) What is the price of the bond if it matures in 25 years? (Round to the nearest cent.) b. What do you notice about the price of the bond in relationship to the maturity of the bond? (Select the best response.) O A. As the time to maturity increases, the price of the bond increases first and then decreases. O B. As the time to maturity increases, the price of the bond increases. O C. As the time to maturity increases, the price of the bond decreases first and then increases. O D. As the time to maturity increases, the price of the bond decreases.
Bond prices and maturity dates. Les Company is about to issue a bond with semiannual coupon payments, an annual coupon rate of 9%, and a par value of $5,000 The yield to maturity, for this bond is 6%. a. What is the price of the bond if it matures in 10, 15, 20, or 25 years? b. What do you notice about the price of the bond in relationship to the maturity, of the bond? a. What is the price of the bond if it matures in 10 years? (Round to the nearest cent.) What is the price of the bond if it matures in 15 years? (Round to the nearest cent.) What is the price of the bond if it matures in 20 years? (Round to the nearest cent.) What is the price of the bond if it matures in 25 years? (Round to the nearest cent.) b. What do you notice about the price of the bond in relationship to the maturity of the bond? (Select the best response.) O A. As the time to maturity increases, the price of the bond increases first and then decreases. O B. As the time to maturity increases, the price of the bond increases. O C. As the time to maturity increases, the price of the bond decreases first and then increases. O D. As the time to maturity increases, the price of the bond decreases.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 17P: Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4...
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Please see attached. Definitions:
Coupon is the regular interest payment of a bond.
Coupon rate is the interest rate for the bond coupons, expressed in annual percentage terms.
Par value is the principal amount to be repaid at the maturity of the bond.
Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity.
Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
Transcribed Image Text:Bond prices and maturity dates. Les Company is about to issue a bond with semiannual coupon payments, an annual coupon rate of 9%, and a par value of $5,000.
The yield to maturity for this bond is 6%.
a. What is the price of the bond if it matures in 10, 15, 20, or 25 years?
b. What do you notice about the price of the bond in relationship to the maturity of the bond?
a. What is the price of the bond if it matures in 10 years?
(Round to the nearest cent.)
What is the price of the bond if it matures in 15 years?
(Round to the nearest cent.)
What is the price of the bond if it matures in 20 years?
(Round to the nearest cent.)
What is the price of the bond if it matures in 25 years?
$
(Round to the nearest cent.)
b. What do you notice about the price of the bond in relationship to the maturity of the bond? (Select the best response.)
O A. As the time to maturity increases, the price of the bond increases first and then decreases.
O B. As the time to maturity increases, the price of the bond increases.
OC. As the time to maturity increases, the price of the bond decreases first and then increases.
O D. As the time to maturity increases, the price of the bond decreases.
Click to select your answer(s).
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