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6. Problem 7.10 (Current Yield, Capital Gains Yleld, and Yield to Maturity) Peizer Printing Inc, has bonds outstanding with 24 years left to maturity, The

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6. Problem 7.10 (Current Yield, Capital Gains Yleld, and Yield to Maturity) Peizer Printing Inc, has bonds outstanding with 24 years left to maturity, The bonds have a 12% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has falien to $920.70. The capital gains yleid last year was 7.93%. a. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. b. For the coming year, what are the expected current and capital gains yields? (Hint: Refer to Footnote 6 for the definition of the current yleld and to Table 7.1. .) Do not round intermedate calculations. Round your answers to two decimal places. Expected current yield: Expected capital gains yield: % c. Will the actual realized yields be equal to the expected yields if interest rates change? It not, how will they differ? I. As rates change they will cause the end-of-year price to change and thus the realized capital gains yleld to change. As a resuit, the realited return to invectors will differ from the YTM. II. As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors will ditfer from the rTM. III. As long as promised coupon payments are made, the current yield will not change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realited return to investers should equal the rIM. IV. As long as promised coupon payments are made, the current yieid will change as a resut of changing interest rates. However, changing rates wit cause the price to change and as a result, the realized return to investors should equal the YTM. V. As long as promised coupon payments are made, the current yield will change as a resut of changling interest rates. Howeves changing rates will not cause the price to change and as a result, the realized return to investors should equal the YTM

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