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

Question

Business

Bruno Kirby

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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Answers (1)

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Amy Riley · Answer 1

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