Pecos manufaturing has just issued a 15-year 12 coupon


Pecos manufaturing has just issued a 15-year, 12% coupon interest rate, $1000-par bond that pays interest annually. The required return is currently 14% and the company is certain it will remain at 14% until the bond matures in 15 years. a. Assuming that the required return does remain at 14%, until maturity, find the value of the bond with (1) 15 yrs, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, and (6) 1 year to maturity. b. Plot your findings in a part a on a set of "required return (x-axis) market value of bond (y axis) axes. c. use your findings in parts a and b to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value. d. what two possible reasons could cause the required return to differ from the coupon interest rate?

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Business Economics: Pecos manufaturing has just issued a 15-year 12 coupon
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