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NEW QUESTION: 1
The price of a bond will approach its par as it approaches maturity. This is called:
A. duration adjustment
B. amortization effect
C. negative carry
D. pull-to-par phenomenon
As a bond approaches maturity, its value will be driven less by the time value of money or its coupons, and more by its redemption value, ie the par. Therefore as maturity approaches, its value converges to its par value and this phenomenon is called pull to par.
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