Pecos Manufacturing issued a 20-year bond with a 6.6 percent coupon rate, five years ago. The coupons are paid semiannually. The required return is currently 10.2 percent, where the company is certain it will remain until the bonds matures in 15 years.

a) Assuming the required return does remain at 10.2 percent until maturity, find the value of each $1,000 of par value bond with (1) 15 years, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, and (6) 1 year to maturity.

b) Plot your findings in a on a chart where time to maturity is the x axis and the market value of the bond is the y axis.

c) All else remaining the same, when the required return differs from the coupon rate and is assumed to be constant to maturity, what happens to the bond value as time moves toward maturity? Explain in light of the graph in b.