Problem: The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of:
a) the bonds with 3 years to maturity?
b) the bonds with 10 years to maturity?
c) Explain the relationship between the number of years until a bond matures and its price.