Bond value and timelong dash—Constant required returns. Pecos Manufacturing has just issued a 15 year 15% coupon interest rate, $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% until maturity, find the value of the bond with (1) 15 years, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, (6) 1 year to maturity.
b. All else remaining the same, when the required return differs from the coupon interest rate and is assumed to be constant to maturity, what happens to the bond value as time moves toward maturity?