Bond Price Movements Miller Corporation has a premium bond making semiannual payments.

The bond pays an 8 percent coupon, has a YTM of 6 percent, and has 13 years to maturity.

The Modigliani Company has a discount bond making semiannual payments. This bond pays a 6 percent coupon, has a YTM of 8 percent, and also has 13 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 3 years?

In 8 years? In 12 years? In 13 years? What’s going on here? Illustrate your answers by graphing bond prices versus time to maturity. LO.1