Explain why an investor would purchase the premium bond in figure 14.6. In generalized terms, what is the composition of the returns to the premium bond; to a zero-coupon bond; to a bond that is called before maturity?

160 140 a 120 9 100 80 60 a 40 20 -Coupon-12% -.. Coupon-4% 10 15 20 25 30 Time years) Figure 14.6 Price path of two 30-year maturity bonds, each selling at a yield to maturity of 8%. Bond price approaches par value as maturity date approaches