Question

Excey Corp. has 10 percent coupon bonds making annual payments with a YTM of 9.5 percent. The current yield on these bonds is 9.85 percent. How many years do these bonds have left until they mature? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

3.76 years

Step-by-step explanation:

Given:

Let face value of bond be $1,000

Coupon rate = 10% or 0.1

Coupon payment (pmt) = $100

YTM (rate) = 9.5%

Current price of the bond is computed by dividing coupon payment by current yield.

Current yield = 9.85% or 0.0985

PV of bond = 100 / 0.0985 = $1,015.23

Compute years to maturity using spreadsheet function nper(rate,pmt,PV,FV)

Years to maturity is 3.76 years.