Question

The Lo Sun Corporation offers a 5.9 percent bond with a current market price of $816.50. The yield to maturity is 8.21 percent. The face value is $1,000. Interest is paid semiannually. How many years until this bond matures

Answer 1

Answer:

11.79 years

Explanation:

using the yield to maturity formula we can determine the number of periods until maturity:

YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

0.0821/2 = {29.5 + [(1,000 - 816.5)/n]} / [(1,000 + 816.5)/2]

0.04105 = {29.5 + [(1,000 - 816.5)/n]} / 908.25

0.04105 x 908.25 = {29.5 + [(183.5)/n]

37.2837 = 29.5 + [(183.5)/n]

7.7837 = 183.5/n

n = 183.5 / 7.7837 = 23.57 / 2 (years) = 11.79 years