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LKD Co. has 13 percent coupon bonds with a YTM of 8.9 percent. The current yield...

LKD Co. has 13 percent coupon bonds with a YTM of 8.9 percent. The current yield on these bonds is 9.5 percent. How many years do these bonds have left until they mature?

Years until maturity

Solutions

Expert Solution

Current Yield = Annual Coupon Payment/Present value of bond

where, coupon rate = 13%

Current yield = 9.5%

If face value =1000, then coupon payment = 130

Using the Current Yield formula,

0.095 = 130/ Present Value

Present Value = 1368.42

Now, Years to maturity = Using excel NPER formula

Syntax: NPER(YTM,coupon payment,present value, face value, 0)

NPER(0.089,130, -1368.42,1000,0)

NPER = 18.86

So, years till maturity = 18.86 years

jeff jeffy answered 2 years ago
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