The Lo Sun Corporation offers a bond with a current market price of $1,029.75,a coupon rate of 8 percent,and a yield to maturity of 7.52 percent.The face value is $1,000.Interest is paid semiannually.How many years is it until this bond matures?

Question

Quizplus · Accepted Answer

The bond pays interest semiannually, so the yield to maturity per period is 3.76% (7.52%/2), and the coupon payment per period is $40 (8% of $1,000/2). Using the bond pricing formula and solving for the number of periods, we find it is 17 periods, which corresponds to 8.5 years (17/2).

The Lo Sun Corporation Offers a Bond with a Current