20. LMN Co. has 12% coupon $1,000 par value bonds making annual coupon payments
with a YTM of 9%. The current yield on these bonds is 9.80%. How many years do
these bonds have left until they mature?
A) 9 years
B) 10 years
C) 13 years
D) 14 years
E) 15 years
Answer C
Current yield = 0.0980 = $120/P
0P
0 = $120/.0980 = $1,224.49
P
0 = $1,224.49 = $120 x PVIFA(9%,n) + $1,000 / (1 + 9%)
nSolving for n = 13 years.
Conceptual questions (2 points each)
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