easy · Principles of Finance

Why does a bond's price move toward its par value as it gets closer to the maturity date, regardless of interest rate levels?

1. The 'time' component of the discount factor is approaching zero.
2. The bond becomes an equity instrument at maturity.
3. Interest rates always return to 0% at the end of a bond's life.
4. Companies are required by law to raise the price to par.

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