Sure Tea Co. has issued 4.8% annual coupon bonds that are now selling at a yield to maturity of 5.50% and current yield of 5.4861%. What is the remaining maturity of these bonds? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

The remaining maturity of these bonds is 76 years.

Explanation:

Where the face value of the bond is not specified, it is typically assumed as $1000. Hence,

Face value = $1000

Annual coupon payment = Face value x Annual coupon rate

                                          = $1000 x 4.8%

                                          = $48

Current yield = Annual coupon payment / Current price

Hence, Current price = Annual coupon payment / Current yield

                                   = $48 / 5.4861%

                                   = $874.938

Time to maturity = NPER (0.055, 48, -874,938, 1000,0)

                           = 76

Therefore, the remaining maturity of these bonds is 76 years.

The period to maturity is 76 years

Explanation:

In order to calculate the remaining maturity period for the bond, the current price-the present value of the bond, is required and it calculated thus:

the current price of the bond =periodic coupon/current yield of the bond

periodic coupon is 4.8%* par value

standard par value is $1000

coupon =$1000*4.8%

             =$48

current yield is 5.4861%

the current price of the bond=$48/5.4861%

                                                =$874.94

The remaining maturity is computed thus:

nper(rate,pmt,-pv,fv)

where nper is the period to maturity

rate is 5.5% rate to maturity

pmt is $48

pv is $874.94

fv is $1000

=nper(5.5%,48,-874.94,1000)

=75.68

nper=period to maturity=76 years

Find attached excel file as well

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