Answer:
It will take about 22 years until the bonds mature.
Explanation:
This can calculated as follows:
BP = FV/(1 + r)^n ..................................... (1)
Where;
BP = Bond price = $211.16
FV = Face value of $1,000
r = Yield to maturity = 7.39%, or 0.0739
n = number of years for the bond to mature = ?
Substituting the values into equation (1) we have:
211.16 = 1,000/(1 + 0.0739)^n
211.16 [(1.0739)^n] = 1,000
(1.0739)^n = 1,000/211.16
(1.0739)^n = 4.73574540632696
Log-linearizing the above, we have:
nln
(1.0739) = ln(4.73574540632696)
n = ln(4.73574540632696)/ln
(1.0739)
= 1.55513913902672/0.0712968818820338
= 21.8121620185272
n = 22 years approximately
Therefore, it will take about 22 years until the bonds mature.
