Question

Bond P is a premium bond with a coupon rate of 9 percent. Bond D has a coupon rate of 4 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 6 percent, and have four years to maturity. 

a. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 

b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (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. Bond P current yield = _______ %

   Bond D current yield  = _______ %

b. Bond P capital gains yield = _______ % 

   Bond D capital gains yield = _______ %

Answer 1