You hold two bonds. You own a $1,000 face value bond from Company B that eleven years to maturity. The other is a $1,000 face value bond from A Corporation that has 8.6% coupons paid once per year, and eleven years to maturity. The market (YTM) for both bonds is 6.6%. a. What is the current yield for Bond A? For Bond B? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.) b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B? (Hint: you will need to solve the price of each bond next year to find the capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers od to? decimal places, e.g., 32.16.)
You hold two bonds. You own a $1,000 face value bond from Company B that eleven years to maturity. The other is a $1,000 face value bond from A Corporation that has 8.6% coupons paid once per year, and eleven years to maturity. The market (YTM) for both bonds is 6.6%. a. What is the current yield for Bond A? For Bond B? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.) b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B? (Hint: you will need to solve the price of each bond next year to find the capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers od to? decimal places, e.g., 32.16.)
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
Problem 1PS
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Transcribed Image Text:You hold two bonds. You own a $1,000 face value bond from Company B that has 4.6% coupons paid once per year, and
eleven years to maturity. The other is a $1,000 face value bond from A Corporation that has 8.6% coupons paid once per year,
and eleven years to maturity.
The market (YTM) for both bonds is 6.6%.
a. What is the current yield for Bond A? For Bond B?
(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.)
b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B?
(Hint: you will need to solve the price of each bond next year to find the capital gains yield.
(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers
as a percent rounded to 2 decimal places, e.g., 32.16.)
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