Question

Excey Corp. has 7 percent coupon bonds making annual payments with a YTM of 6.2 percent. The current yield on these bonds is 6.55 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

12.64 years

Step-by-step explanation:

Coupon rate is 7%

Current yield is 6.55%

Then the current price = 7 / 0.0655 = $106.87 per $100 par value.

Now calculating the no of years these bonds have left until they mature:

106.87 = 7*PVIFA(6.2%,n) + $100*PVIF(6.2%,n)

N = 12.64 years