Question

Global Communications has an 8 percent, semiannual coupon bond outstanding with a current market price of $1,021.26. The bond has a par value of $1,000 and a yield to maturity of 6.74 percent. How many years is it until this bond matures?

a) 3.53
b) 1.82
c) 3.34
d) 1.71

Answer 1

Answer: 1.82

Step-by-step explanation:

Following the information given, the number of years that it will take until this bond matures will be calculated thus:

Current price = $1021.26

Coupon = 8% = 0.08

Face value = $1000

Semiannual coupon = 0.08/2 × 1000 = 40

Semiannual Yield = 6.74%/2 = 0.0674/2 = 0.0337

Total semiannual period = NPER(0.0337, 40, -1021.26, 1000) = 3.64

Total years will now be: = 3.64/2 = 1.82

Therefore, the correct option is B.