Redesigned computers has 9 percent coupon bonds outstanding with a current market price of $896.23. the yield to maturity is 10.34 percent and the face value is $1,000. interest is paid semiannually. how many years is it until this bond matures

16 years to maturity

Explanation:

We will calculate time:

The bonds present value is 896.23

YTM 10.34

and the face value is 1,000

Coupon Payment:45 (1,000 x 9% / 2 payment per year)

timen

rate0.0517 (10.34/2 payment per year

PVc

Maturity   1,000.00

time   n

rate  0.0517

PVm

PV c + PV m = 896.23

We rearrenge:

We solve to clear the expression 1.0517 power -n:

We now use logarithmics properties:

n = 32.00  

These are semianual payment, so we will divide by two to get the time expressses in years:

32/2 = 16 years to maturity

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