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Dynamic Systems has an outstanding bond that has a $1,000 par value and an 8 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places. %

Dynamic Systems has an outstanding bond that has a $1,000 par value and an 8 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places. %

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Dynamic Systems has an outstanding bond that has a $1,000 par value and an 8 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future.

  1. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places.

     _____ %

  2. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places.

    _____  %
Dynamic Systems has an outstanding bond that has a $1,000 par value and an 8 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places. %
Transcribed Image Text:Dynamic Systems has an outstanding bond that has a $1,000 par value and an 8 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places. %
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Why is the capital gains yield simply the interest rate minus the current yield?  Isn't capital gains yield usually something like (ending value - beginning value) / beginning value? If the question was to calculate capital gains yield for the 3rd year, would that be solved differently?

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