Question

An 8 percent semiannual coupon bond is priced at $1,204.60. The bond has a $1,000 face value and a yield to maturity of 4.88 percent. How many years will it be until this bond matures?

Answer 1

present value is $1,204.6
8% of nominal value of $1000 is $80; paid twice yearly is $40 every 6 months.
payments of $40 will be made every 6 months for n years - so calculate an annuity certain for n years
Payment of $1000 will be made in n years so discount $1,000 for n years

Plug into excel and use solver to get n. Use 4.88% p.a. to discount. Should be around 8 years.

8 years

Answer 2

An 8 percent semiannual coupon bond is priced at $1,204.60. The bond has a $1,000 face value and a yield to maturity of 4.88 percent. How many years will it be until this bond matures?
a. 8.00 years----answer
b. 8.65 years
c. 15.91 years
d. 16.00 years
e. 17.29 years