Question

The zero coupon bonds of Mark Enterprises have a market price of $394.47, a face value of $1,000, and a yield to maturity of 6.87 percent based on semiannual compounding. How many years is it until this bond matures?

Answer 1

Answer:

7 years to matures the bond

Explanation:

F=face value=1000

P=market price=bond price=394.47

r=yield to maturity=6.87%=semi annually, yearly =6.87*2=13.74 %

T= years of maturity=?

Formula= YTD= ( Face value/Bond price)∧1/T-1

       .1374=(1000/394.47)∧1/T-1

          1+0.1374=2.535∧1/T

          1.1374=2.535∧1/T

          1.1374=[(1.1374∧7)]∧1/T

          1=7/T

          T=7 years.