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

The formula for the price of a zero-coupon bond is: Price = Face Value / (1 + Yield)^Years. Plugging in the values: $394.47 = $1,000 / (1 + 0.0687)^Years. Solving for Years gives approximately 14 years.

The Zero-Coupon Bonds of Markco, Inc