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
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Answer:
$1,061.28
Explanation:
We need to calculate the present value of the bond using the minimum effective rate of 7.1225%
First we calcualte the present value of an annuity of $80 for 10 years
PV = $558.72
Then we calculate the $1,000 in 10 years present value
PV = $502.57
Then we add both values
$502.57 + $558.72 = $1,061.28
This will be the present value AKA market price which yields the minimun rate of 7.1225%