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?

Question

Quizplus · Accepted Answer

The formula for the price of a zero-coupon bond is P = F / (1 + r/n)^(nt), where P is the price, F is the face value, r is the yield to maturity, n is the number of compounding periods per year, and t is the number of years. Solving for t using the given values (P = $394.47, F = $1,000, r = 0.0687, n = 2) gives approximately 13.77 years.

The Zero Coupon Bonds of Mark Enterprises Have a Market