Toxaway Telephone Company has a $1,000 par value bond outstanding that pays 6 percent annual interest.

If the yield to maturity is 8 percent, and remains so over the remaining life of the bond, the bond will have the following values over time:

Remaining Maturity

Bond Price

15

$795.67

10

$830.49

5

$891.86

1

$973.21

Graph the relationship in a manner similar to the bottom half of Figure 10-2 of the textbook. Also explain why the pattern of price change takes place.