Pecos Manufacturing has just issued a 15-year, 12% coupon interestrate, $1,000-par bond that pays interest annually. The required return is currently 17%, and the company is certain it will remain at 17% until the bond matures in 15 years.

a.Assuming that the required return does remain at 17% untilmaturity, find the value of the bond with(1) 15 years, (2) 12years, (3) 9years, (4) 6years, (5) 3years, (6) 1 year to maturity.

b.All else remaining thesame, when the required return differs from the coupon interest rate and is assumed to be constant tomaturity, what happens to the bond value as time moves towardmaturity? Explain in light of the followinggraph: