K According to the figure below, as a bond approaches maturity the premium (or discount) reduces...

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K According to the figure below, as a bond approaches maturity the premium (or discount) reduces to zero. Prove this by calculating the sales price with 7, 5, and 2 years remaining to maturity for the following two bonds. Assume a constant yield to maturity of 8 percent. a. A 10-year, 12 percent annual coupon bond. b. A 10-year, 5 percent annual coupon bond. Click on the table icon to view the PVIF table Click on the table icon to view the PVIFA table $1,117 Bond value when required rate of return = 9% (premium bond) Bond value when required rate of return = 12% $1,200 $1,053 $1,100 Maturity $1,000 S a. The sales, price, PV, of a 10-year, 12 percent annual coupon bond, a yield to maturity of 8 percent and with 7 years remaining to maturity is $ (Round to the nearest cent.) Data table Data table Compound Sum of $1 (PVIF) 10 52570 n 6% 7% 8% 9% 10% 0.890 0.873 0.857 0.842 0.826 n 6% 7% Compound Sum of $1 (PVIFA) 8% 9% 10% 0.747 0.713 0.681 0.650 0.621 2 1.833 1.808 1.783 1.759 1.736 0.665 0.623 0.583 0.547 0.513 5 4.212 4.100 3.993 3.890 3.791 0.558 0.508 0.463 0.422 0.386 7 5.582 5.389 5.206 5.033 4.868 10 7.360. 7.024 6.710 6.418 6.145 View an example Get more help Print Done Print Done = X Clear all Check answer K According to the figure below, as a bond approaches maturity the premium (or discount) reduces to zero. Prove this by calculating the sales price with 7, 5, and 2 years remaining to maturity for the following two bonds. Assume a constant yield to maturity of 8 percent. a. A 10-year, 12 percent annual coupon bond. b. A 10-year, 5 percent annual coupon bond. Click on the table icon to view the PVIF table Click on the table icon to view the PVIFA table $1,117 Bond value when required rate of return = 9% (premium bond) Bond value when required rate of return = 12% $1,200 $1,053 $1,100 Maturity $1,000 S a. The sales, price, PV, of a 10-year, 12 percent annual coupon bond, a yield to maturity of 8 percent and with 7 years remaining to maturity is $ (Round to the nearest cent.) Data table Data table Compound Sum of $1 (PVIF) 10 52570 n 6% 7% 8% 9% 10% 0.890 0.873 0.857 0.842 0.826 n 6% 7% Compound Sum of $1 (PVIFA) 8% 9% 10% 0.747 0.713 0.681 0.650 0.621 2 1.833 1.808 1.783 1.759 1.736 0.665 0.623 0.583 0.547 0.513 5 4.212 4.100 3.993 3.890 3.791 0.558 0.508 0.463 0.422 0.386 7 5.582 5.389 5.206 5.033 4.868 10 7.360. 7.024 6.710 6.418 6.145 View an example Get more help Print Done Print Done = X Clear all Check answer