Bond P is a premium bond with a coupon rate of 13 percent. Bond D has a coupon r
ID: 2749269 • Letter: B
Question
Bond P is a premium bond with a coupon rate of 13 percent. Bond D has a coupon rate of 8 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 10 percent, and have six years to maturity.
What is the current yield for bond P and bond D? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P and bond D? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Bond P is a premium bond with a coupon rate of 13 percent. Bond D has a coupon rate of 8 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 10 percent, and have six years to maturity.
Explanation / Answer
For Bond P
For Bond D
To find current yield, we need to find the current price of the bonds Current price=Present value of the bond= PV of annual interest + PV @ maturity