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?

Ans. 16 years to maturity

Explanation:

Hi, first we need to establish the amount of money of the coupons, in our case, 7% semi-annual, that means that we have to do use the following formula:

Now, in order to find the yield to maturity in semi-annual terms, we have to do the following.

Then we have to use the "find goal" function of MS Excel in order to solve the following equation, which must be equal to $1,023.46

As you can see, solve this is not easy or practical therefore we have to use the "find goal" function" of MS Excel. Please see the file attached to this answer for more details in the formula. Below, please find how I propose to organize the information and the answer.}

Face Value                       $1.000  

Price                               $1.023,46  

Coupon(annual)                       7%  

Coupon (semi-annual)               0,035  $35  

YTM(Years)                            6,72%  

YTM(Semester)                    3,3054%  

years to maturity                   15,62771676= 16

PV Coupons                              $400,83  

PV Final PMT                              $622,63  

Price Given (n)                     $1.023,46  

Best of luck.

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