Question

High noon sun, inc. has a 5%, semiannual coupon bond with a current market price of $988.52. the bond has a par value of $1,000 and a yield to maturity of 5.29%. how many years is it until this bond matures?

Answer 1

The answer is 4.5 years

Given : semi annual bond

current market price : $988.52

par value : $1,000

maturity : 5.29%

PMT = 5% x $1000 / 2 = $25,

PV = $988.52,

FV = $1000, and

Int/half a year = 5.29%/2 = 2.645%.

Solving for N = 9 (semi annual periods).

9/2 = 4.5.