Beam Inc. bonds are trading today for a price of $1 comma 073.18. The bond pays annual coupons with a coupon rate of 9.5% and the next coupon is due in one year. The bond has a yield to maturity of 8.09%. How many years are there until the bond matures? The number of years until the bond matures is nothing years. (Round to the nearest whole number.)
Answer : The number of years until the bond matures is 7 years.
Calculation of number of years to maturity :
Number of years to maturity can be calculated using Nper function of Excel :
=NPER(rate,pmt,pv,fv)
where
rate is the yield to maturity of the bond i.e 8.09%
pmt is the coupon payment i.e 1000 * 9.5% = 95
pv is the current market price of Bond i.e 1073.18
fv is the face value i.e 1000
=NPER(8.09%,95,-1073.18,1000)
It gives Number of years to maturity as 7 years .
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