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What is the time to maturity of a 6.0% coupon bond if its YTM is 9.0%?...

What is the time to maturity of a 6.0% coupon bond if its YTM is 9.0%? The bond's price is $766.42 and coupons are paid annually.

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Expert Solution

At 14 years time to maturity bond price is equal to given price.

Particulars Cash flow Discount factor Discounted cash flow
present value Interest payments-Annuity (9%,14 periods) $                         60.00 7.78615 $                467.17
Present value of bond face amount -Present value (9%,14 periods) $                    1,000.00 0.29925 $                299.25
Bond price $                766.42
Face value $             1,000.00
Premium/(Discount) $              (233.58)

Answer is 14 years.

jeff jeffy answered 1 year ago
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