Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have five years to maturity. Assume these bonds have a face value of $1,000.
A. What is the current yield for bond P? For bond D?
B. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? For bond D?
Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have five years to maturity. Assume these bonds have a face value of $1,000.
A. What is the current yield for bond P? For bond D?
B. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? For bond D?
Related questions
Bond P is a premium bond with a coupon rate of 8.8 percent. Bond D is a discount bond with a coupon rate of 4.8 percent. Both bonds make annual payments, have a YTM of 6.8 percent, and have thirteen years to maturity.
| Requirement 1: |
| What is the current yield for bond P? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Current yield | % |
| Requirement 2: |
| What is the current yield for bond D? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Current yield | % |
| Requirement 3: |
| If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) |
| Capital gains yield | % |
| Requirement 4: |
| If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Capital gains yield | % |
