Question
Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 8 percent, has a YTM of 6 percent, and has
Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 8 percent, has a YTM of 6 percent, and has 20 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond pays a coupon of 6 percent, has a YTM of 8 percent, and also has 20 years to maturity. Both bonds have a par value of $1,000. 1. What is the difference between the bond prices today (enter a non-negative number only)? 2. What is the difference between the bond prices after 20 years (enter a non-negative number only)? 3. What is the difference between the bond prices in 12 years (enter a non-negative number only)? 4. As the time goes by, the bond price of Miller Corporation will [increase, decrease, remain unchanged ] , [ Select ] the face value. The bond price of Modigliani Company will [ Select ] , [ Select ] the face value.
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