World Travel has 7 percent, semiannual, coupon bonds outstanding with a current market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent. How many years is it until these bonds mature?

Question

Quizplus · Accepted Answer

To calculate the number of years until maturity, we can use the following formula:

n = ln(PV/FV) / (ln(1 + i))

where:
PV = present value of the bond = $1,023.46
FV = face value of the bond = $1,000
i = yield to maturity = 6.72% = 0.0672 (as a decimal)

Plugging in the values, we get:

n = ln(1,023.46/1,000) / (ln(1 + 0.0672/2))
n = ln(1.02346) / (ln(1.0336))
n = 12.53

Therefore, it will take approximately 12.53 years for the bonds to mature. The closest answer choice is (B) 12.53 years.

World Travel Has 7 Percent, Semiannual, Coupon Bonds Outstanding with a Current