What happens to bond value as time moves toward maturity

Assignment Help Financial Management

Reference no: EM131967593

Bond value and timelong dash—Constant required returns. Pecos Manufacturing has just issued a 15 year 15% coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 17%, and the company is certain it will remain at 17% until the bond matures in 15 years.

a. Assuming that the required return does remain at 17% until maturity, find the value of the bond with (1) 15 years, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, (6) 1 year to maturity.

b. 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?

Reference no: EM131967593

Questions Cloud

The current price is represented by the dividends forcast : Refering to the above information what percentage of the current price is represented by the dividends forcast to be paid after year 4?

What is the project payback period : What is the project's payback period? What is the project's NPV. What is the project's PI?

What is the cash flow to shareholders for the company : What is the cash flow to shareholders for the company. Cash Flow to Shareholders.

What is the current value of operations : If the overall cost of capital is 14 percent, what is the current value of operations, to the nearest million?

What happens to bond value as time moves toward maturity : when required return differs from coupon interest rate and is assumed to be constant to maturity, what happens to bond value as time moves toward maturity?

The company achieve without having to raise funds : How large of a sales increase can the company achieve without having to raise funds externally?

The construction financing obtained for the improvements : Estimate construction draw schedule, interest carry, and total cost of the construction financing obtained for the improvements.

What is the present value of stream of cash flows : what is the present value of this stream of cash flows? What is the present value of this stream of cash flows?

What is the client realized gain : If the market of Speedy Airlines is trading at $39.08 at expiration, what is the client’s realized gain?

User Account

All Pages