Question

Company Y's bonds make semi-annual coupon payments of $55 each, have a par value of $1000, a current price of $1198.02, and a YTM of 7.5%. How many years until the bonds mature?

Answer 1

7.5 years

Step-by-step explanation:

Calculation for how many years until the bonds mature

First step is to find the Number of periods using financial calculator:

I/Y = 7.5/2 = 3.75

PV = -1198.02

PMT = 55

FV = 1,000

Press CPT, then N, which will gives us 15

Number of periods = 15

Second Step is to calculate the number of years to maturity

Using this formula

Number of years to maturity = Number of periods / Number of compounding periods in a year

Let plug in the formula

Number of years to maturity= 15/2

Number of years to maturity= 7.5 years

Therefore how many years until the bonds mature will be 7.5 years