You hold two bonds. You own a $1,000 face value bond from Company B that has 5.2% coupons paid once per year, and seven years to maturity. The other is a $1,000 face value bond from A Corporation that has 9.2% coupons paid once per year, and seven years to maturity. The market (YTM) for both bonds is 7.2%. 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.) a. Current yield b. Capital gains yield Bond A % % Bond B % %
You hold two bonds. You own a $1,000 face value bond from Company B that has 5.2% coupons paid once per year, and seven years to maturity. The other is a $1,000 face value bond from A Corporation that has 9.2% coupons paid once per year, and seven years to maturity. The market (YTM) for both bonds is 7.2%. 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.) a. Current yield b. Capital gains yield Bond A % % Bond B % %
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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Raghubhai
Transcribed Image Text:You hold two bonds. You own a $1,000 face value bond from Company B that has 5.2% coupons paid once per year, and
seven years to maturity. The other is a $1,000 face value bond from A Corporation that has 9.2% coupons paid once per year,
and seven years to maturity.
The market (YTM) for both bonds is 7.2%.
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.)
a. Current yield
b. Capital gains yield
Bond A
%
%
Bond B
%
%
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