Baker's Men's Wear has a 5.5%, semiannual coupon bond outstanding with a current market price of $978.90. The bond has a par value of $1,000 and a yield to maturity of 5.76%. How many years is it until this bond matures?

A) 11.10 years
B) 12.27 years
C) 22.19 years
D) 27.21 years
E) 44.38 years

Question

Elias AlShuaibi · Accepted Answer

Final Answer : A, Explanation :  The bond has a yield to maturity of 5.76%, which is greater than its coupon rate of 5.5%. This means that the bond is selling at a discount. The number of years until the bond matures can be calculated using the following formula:Number of years to maturity = (Par value - Market price) / (Coupon payment * (1 + Yield to maturity / 2)^(-2 * Number of years to maturity))Plugging in the given values, we get:Number of years to maturity = (1000 - 978.90) / (55 * (1 + 0.0576 / 2)^(-2 * Number of years to maturity))Solving for the number of years to maturity, we get:Number of years to maturity = 11.10 years

Baker's Men's Wear has a 5.5%, semiannual coupon bond outstanding with a current market price of $978.90. The bond has a par value of $1,000 and a yield to maturity of 5.76%. How many years is it until this bond matures?

A) 11.10 years
B) 12.27 years
C) 22.19 years
D) 27.21 years
E) 44.38 years

Definitions

Learning Objectives

Learning Objectives

Related questions

Baker's Men's Wear has a 5.5%, semiannual coupon bond outstanding with a current market price of $978.90. The bond has a par value of $1,000 and a yield to maturity of 5.76%. How many years is it until this bond matures?A) 11.10 yearsB) 12.27 yearsC) 22.19 yearsD) 27.21 yearsE) 44.38 years

Definitions

Learning Objectives

Learning Objectives

Related questions

Baker's Men's Wear has a 5.5%, semiannual coupon bond outstanding with a current market price of $978.90. The bond has a par value of $1,000 and a yield to maturity of 5.76%. How many years is it until this bond matures?

A) 11.10 years
B) 12.27 years
C) 22.19 years
D) 27.21 years
E) 44.38 years