Question

The Lo Sun Corporation offers a 5.1 percent bond with a current market price of $872.50. The yield to maturity is 6.19 percent. The face value is $1,000. Interest is paid semiannually. How many years until this bond matures

Answer 1

21.12 years

Step-by-step explanation:

The nper excel function can be used to compute the number of years the bond would mature as shown below:

=nper(rate,pmt,-pv,fv)

rate is the semiannual yield to maturity which is 6.19%/2

pmt is the semiannual coupon payment=5.1%/2*$1000=25.5

pv is the current market price of $872.50

fv is the face value of $1000

=nper(6.19%/2,25.5,-872.50,1000)= 42.24

The 42.24 implies the number of six-month intervals the bond has

number of years= 42.24/2=21.12