Question
ABC Corporation issued at par $100 million semi-annual coupon-paying bonds on January 1, 2010. The bonds YTM at issuance was 8% (APR). The bond matures
ABC Corporation issued at par $100 million semi-annual coupon-paying bonds on January 1, 2010. The bonds YTM at issuance was 8% (APR). The bond matures on January 1, 2020
Compute the market value of this bond on January 1, 2011 if it was priced to produce an effective semi-annual yield to maturity of 6% on that date.
Assume the bond is sold on January 1, 2011. Calculate the current yield and 1-year capital gains yield (CGY1-year).
Can the 1-year total yield be determined by the sum of current yield and capital gains yield? Explain your answer.
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Financial Management Principles And Applications
Authors: Arthur J. Keown
9th Edition
013033362X, 9780130333629
