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, 10 percent annual coupon bond. b. A 10-year, 5 percent annual coupon bond. Click on the table icon to view the PVIF table E. Click on the table icon to view the PVIFA table : $1,200 $1,117 Bond value when required rate of retum = 9% (premium bond) $1.053 $1,100 Maturity Bond value when required rate of return = 12% $1,000 Marlet value $951 $900 $899 Bond value when required rate of retum = 15% (discount bond) $800 5 0 Years Left to Maturity