10029 View Question 5 (10 marks) Bond P is a 12 percent coupon bond that is selling at a premium. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments and have a YTM of 9 percent and have 5 years to maturity. a. What is the current yield for bond P? (2 marks) b. What is the current yield for bond D? (2 marks) If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? (2 marks) d. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D? (2 marks) Explain your answers and the interrelationships among the YTM, the coupon rate and the capital gains yield. (2 marks) C. e. Due 6:00 pm, June 5, 2020 Page 7 FINA2360 Summer 2020 Assignment #2 Total 52 marks Due Friday June 5, 2020 at 6:00 pm TALISTILIC Dayngrit Saving Time. Question 6 (3 marks) Any regular coupon bond of any maturity will sell for its face value if the coupon rate is the same as the market rate of interest. TRUE or FALSE? Explain and provide an example to support your answer. Problem 7. (9 marks) Three years ago, you purchased a 30 year, $1,000 par value bond for a quoted price of 95.0. The bond pays its 5% coupon semi-annually. a) If the present market rate on identical bonds is 4%, at what price should the bond trade today? (3 marks) b) If you sell your bond today for the price you calculated above, what is your EFFECTIVE ANNUAL HOLDING PERIOD RETURN over the 3-year period? (6 marks)