Question

Beam Inc. bonds are trading today for a price of ​$1,394.15. The bond pays annual coupons with a coupon rate of 5​% and the next coupon is due in one year. The bond has a yield to maturity of 2.62​%. How many years are there until the bond​ matures? 

Answer 1

Calculation of number of years to maturity(n):
Market price(P)=$1394.15
Face value(F)= $1000
Yield to maturity(YTM)= 2.62%
Coupon payment( C )= 1000*0.05= $50
Let Coupon payment= C
YTM=	C+ (F-P)/n
	(F+P)/2
0.0262=	50+(1000-1394.15)/n
	(1000+1394.15)/2
0.0262*1197.075= 50-394.15/n
31.3634=50-394.15/n
50-31.3634=394.15/n
18.6366=394.15/n
n= 21.15 years
Therefore number of years to maturity is 21.15 years