The zero coupon bonds of MarkCo,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

Using the formula for calculating yield to maturity of a zero coupon bond, we can solve for the number of years until maturity:
P = F / (1 + r)^t 
where P = market price, F = face value, r = yield to maturity, and t = time until maturity.
Plugging in the given values:
394.47 = 1000 / (1 + 0.0687)^t
Using logarithms to solve for t:
t = ln(1000/394.47) / ln(1.0687)
t ≈ 14
Therefore, it will take approximately 14 years for the bond to mature.

The Zero Coupon Bonds of MarkCo,Inc