Six Days, Inc., has a 7%, semi-annual coupon bond with a current market price of $1,010.40. The bond has a par value of $1,000 and a yield to maturity of 6.87%. How many years is it until this bond matures?

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Quizplus · Accepted Answer

The bond pays interest semi-annually, so the coupon payment is 3.5% of the par value every six months. The yield to maturity is also semi-annual at 3.435% (half of 6.87%). Using the bond pricing formula and solving for the number of periods, we find that the bond matures in approximately 23.62 semi-annual periods, which is equivalent to 11.81 years.