Question

You have just found an annual-coupon corporate bond with a 10% coupon rate and yield to maturity of 8.5%. It is trading at a premium for $1,098.42. What is the maturity of this bond?

Answer 1

C	100
n	n
P	1000
Bond Price	1098.42
YTM	8.50%
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
$1098.42=100 * [1 - (1 + 0.085)^-n / 0.085] + [1000 / (1 + 0.085) ^n]
n =10 years