Develop a valuation model for a corporate bond with a par value at maturity of $1,000,...

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Finance

Develop a valuation model for a corporate bond with a par valueat maturity of $1,000, a maturity of 20 years, a coupon interestrate of 7%, and a yield to maturity of 4%. The coupons are assumedto be paid semi-annually. In your development and presentation,include a time line showing the relevant cash flows along with allof the steps that allow you to generate the value (price of thebond).
Given the problem above, identify how the bond price will beexpected to adjust across time as the bond approaches maturity. Youshould calculate the price after each 2-year period has passed –i.e., after year 2, year 4, year 6, year 8, year 10, year 12, year14, year 16, year 18, and year 20. Graph the resulting movement inthe price across time using the resulting values. Explain how thismovement in the bond price across time is important for theinvestor.

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Develop a valuation model for a corporate bond with a par valueat maturity of $1,000, a maturity of 20 years, a coupon interestrate of 7%, and a yield to maturity of 4%. The coupons are assumedto be paid semi-annually. In your development and presentation,include a time line showing the relevant cash flows along with allof the steps that allow you to generate the value (price of thebond).Given the problem above, identify how the bond price will beexpected to adjust across time as the bond approaches maturity. Youshould calculate the price after each 2-year period has passed –i.e., after year 2, year 4, year 6, year 8, year 10, year 12, year14, year 16, year 18, and year 20. Graph the resulting movement inthe price across time using the resulting values. Explain how thismovement in the bond price across time is important for theinvestor.