6.  Murphy Manufacturing has just issued a 15-year,12% coupon interest rate, $1,000-par bond that pays interestannually. The required return is currently 11%, and the company iscertain it will remain at 11% until the bond matures in 15years.
- Assuming that the required return does remain at 11% untilmaturity, find the value of the bond with (1) 15 years, (2) 12years, (3) 9 years, (4) 6 years, (5) 3 years, and (6) 1 year tomaturity.
- Plot your findings on a set of “time to maturity (x axis) –market value of bond (y axis).
- All else remaining the same, when the required return differsfrom 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 graph in part b.
