LKD Co. has 10 percent coupon bonds with a YTM of 8.2 percent. The current yield on these bonds is 9.6 percent. How many years do these bonds have left until they mature?
Answer
Maturity period is
Explanation
Current price (CP) is computed using the equation given below:
CP = Coupon payment / Current yield
= {$1,000 * 10%) / 9.6%
= $1,041.67
Number of years to maturity (NPER) is computed using the excel formula given below:
Number of years = NPER (rate, PMT, -PV, FV)
where rate = 8.2%
PMT = $1,000 * 10% = $100
PV = $1,041.67
FV = $1,000
Number of years = NPER (8.2%, $100, -$1041.67, $1000)
= 2.671083 years
Hence, the number of years to maturity is 2.671083 years.
LKD Co. has 10 percent coupon bonds with a YTM of 8.2 percent. The current yield...