When the required return is different from the coupon interest rate and is constant until maturity, the value of the bond will approach its par value as it nears maturity.

Question

Quizplus · Accepted Answer

As a bond approaches its maturity date, its price converges towards its par value, regardless of the coupon rate, because the repayment of the principal amount becomes the dominant value component, reducing the impact of the interest rate environment.

When the Required Return Is Different from the Coupon Interest