The zero coupon bonds of Quipta Inc. have a market price of $394.47, a face value of $1,000, and a yield to maturity of 6.87%. How many years is it until this bond matures?

Question

Quizplus · Accepted Answer

The maturity period can be calculated using the formula for the present value of a zero coupon bond: $ P = \frac{F}{(1 + r)^n} $. Solving for $ n $ gives $ n = \frac{\log(F/P)}{\log(1 + r)} $. Substituting the given values: $ F = 1000 $, $ P = 394.47 $, $ r = 0.0687 $, we find $ n \approx 14 $ years.

The Zero Coupon Bonds of Quipta Inc