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13 January, 17:53

Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $742. The yield to maturity is 13.2 percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature

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  1. 13 January, 21:37
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    The question is missing below options:

    A. 5.73 years

    B. 4.19 years

    C. 7.41 years

    D. 6.16 years

    E. 8.32 years

    The correct option is A, 5.73 years

    Explanation:

    The number of years the matures can be determined using the nper formula in excel.

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

    rate is the yield to maturity on the bond which is given as 13.2%

    pmt is the periodic coupon interest payable by the bond, which is calculated as: 6.5%*$1000=$65

    pv is the current price of the bond which is $742

    fv is the bond value receivable by investors upon maturity of the bond and it is $1000

    =nper (13.2%,65,-742,1000)

    nper=5.73

    This could mean 6 years but the options above were stated to reflect two decimal places
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Home » Business » Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $742. The yield to maturity is 13.2 percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature
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