medium · Principles of Finance valuation
Why does a bond's price move toward its par value as it gets closer to the maturity date, regardless of interest rate levels?
- The 'time' component of the discount factor is approaching zero.
- The bond becomes an equity instrument at maturity.
- Interest rates always return to 0% at the end of a bond's life.
- Companies are required by law to raise the price to par.
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