Excey Corp. has 7 percent coupon bonds making annual payments with a YTM of 6.4 percent. The current yield on these bonds is 6.75 percent.

Problem 7-25 Finding the Bond Maturity [LO2]

How many years do these bonds have left until they mature?

Solutions

Expert Solution

Assume Par Value be $1000

Current Yield = Annual Coupon / Current Bond Price

0.0675 = [7%*$1000] / Current Bond Price

Current Bond Price = $70 / 0.0675 = $1037.04

To find the N, we need to put the following values in the financial calculator:

I/Y = 6.4;

PV = -1037.04;

PMT = 70;

FV = 1000;

Press CPT, then N, which gives us 8.10

So, bond maturity is 8.10 years

jeff jeffy answered 2 years ago

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