Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $548. The yield to maturity is 13.2
percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature?A. 5.73 yearsB. 7.41 yearsC. 6.16 yearsD. 4.19 years
1 answer:
Answer:
17.84 years
Explanation:
For this question, we use the NPER function that is presented on the excel spreadsheet. Kindly find the attachment below:
Given that,
Present value = $548
Future value = $1,000
Rate of interest = 13.20%
PMT = $1,000 × 6.5% = $65
The formula is shown below:
= NPER(Rate,PMT,-PV,FV,type)
The present value come in negative
So, after solving this, the number of years until these bonds mature is 17.84 years
You might be interested in
Answer:
$34.63.
Explanation:
The Gordon Dividend Discount Model will be used to calculate the current share price. This model helps us to determine how much should we pay for a stock and the analysis is based on dividends, growth rate, and our required rate of return. The model is as follows:
where
Po = Current market Price
D1 = Dividend Paid * (1 + g)
D2 = D1 (1 + g) ; D3 = D2 (1 + g) ; D4 = D3 (1 + g) ; D5 = D4 (1 + g)
D6 = D5 (1 + g) ; D7 = D6 (1 + g)
This implies that:
⇒ Current Market Price = $34.63.
Note: Figures are rounded up-to 4 decimal points. A difference of up-to $2 would not affect your scores as far as the methodology is correct.