Draw a graph showing how the bond price for each bond changes over time as they move towards their maturity dates. Describe the relationship between bond prices and the time remaining for maturity. Years remaining to Maturity 10 9 8 0765 40 NA 3 2 0 BOND A Coupon rate = 8% p.a. Market interest rate = 6% p.a. $109.67 $108.72 $107.79 $106.88 $105.98 $105.10 $104.23 $103.38 $102.54 $101.72 $100.00 BOND B Coupon rate = 6% p.a. Market interest rate = 6% p.a. $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 BOND C Coupon rate = 4% p.a. Market interest rate = 6% p.a. $95.24 $91.08 $87.02 $83.06 $79.21 $75.47 $71.83 $68.29 $64.86 $61.54 $58.33
Draw a graph showing how the bond price for each bond changes over time as they move towards their maturity dates. Describe the relationship between bond prices and the time remaining for maturity. Years remaining to Maturity 10 9 8 0765 40 NA 3 2 0 BOND A Coupon rate = 8% p.a. Market interest rate = 6% p.a. $109.67 $108.72 $107.79 $106.88 $105.98 $105.10 $104.23 $103.38 $102.54 $101.72 $100.00 BOND B Coupon rate = 6% p.a. Market interest rate = 6% p.a. $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 BOND C Coupon rate = 4% p.a. Market interest rate = 6% p.a. $95.24 $91.08 $87.02 $83.06 $79.21 $75.47 $71.83 $68.29 $64.86 $61.54 $58.33
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Draw a graph showing how the bond price for each bond changes over time as
they move towards their maturity dates. Describe the relationship between bond
prices and the time remaining for maturity.
Years
remaining
to
Maturity
10
9
8
0765 40 NA
3
2
0
BOND A
Coupon rate = 8% p.a.
Market interest rate =
6% p.a.
$109.67
$108.72
$107.79
$106.88
$105.98
$105.10
$104.23
$103.38
$102.54
$101.72
$100.00
BOND B
Coupon rate = 6% p.a.
Market interest rate =
6% p.a.
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
BOND C
Coupon rate = 4% p.a.
Market interest rate =
6% p.a.
$95.24
$91.08
$87.02
$83.06
$79.21
$75.47
$71.83
$68.29
$64.86
$61.54
$58.33
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