Question

The Lo Sun Corporation offers a 5.7 percent bond with a current market price of $830.50. The yield to maturity is 8.15 percent. The face value is $1,000. Interest is paid semiannually. How many years until this bond matures?

• 20.77 years

• 10.39 years

• 5.19 years

• 29.14 years

• 19.96 years

Answer 1

C	28.5
n	n
P	1000
Bond Price	830.5
YTM (8.15/2)	4.075
Bond price =C*[1-(1+YTM)^-n / YTM] + [P/(1+YTM)^n]
Where,
C= Coupon amount
YTM = Yield To maturity
n = Number of periods
P= Par value
$830.5=28.5 * [1 - (1 + 0.04075)^-n / 0.04075 + [1000 / (1 + 0.04075 ) ^n]
n =20.77	(total six months)
Years to maturity =20.77/2
=10.39 years
Correct Option: SECOND