Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000.

Question:

Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,200.
a. What are the bond’s nominal yield to maturity and its nominal yield to call? Would an investor be more likely to earn the YTM or the YTC?
b. What is the current yield? Is this yield affected by whether the bond is likely to be called? (Hint: Refer to footnote 7 for the definition of the current yield and to Table 7.1.)
c. What is the expected capital gains (or loss) yield for the coming year? Is this yield dependent on whether the bond is expected to be called? Explain your answer.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...