att vear Carcon Industries itsued a 10-yeac; 12% semiannual coupon bond of its par value of $1,000. Currently, the bond can be called in 6 years at a price of 51,060 and it selis for $1,150. TTM: Would an investar be incre likely to eam the MM or the MT? Is tevis yed alfected by whecher the bond is likely to be caled? 1. If the biond as aited, the capital grint vieid wal remain the ume but the cument vield wer be efferent. It. It the bend is caled, the cument yels and the cosctal gains yield will beth be offerevit. N. H the bend is caled, the currect viets will remain the hame but the captal owins yeid wit be diterent. whase ta tima decimal placeL. Tv. If va bend is epectied ta be cales, the soproprate enpected butal return wit nat change. ast year Carson Industries issued a 10 -year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 What are the bond's nominal yleld to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to YTM: YTC: Would an investor be more likely to earn the YTM or the YTC? b. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decima \% Is this yield affected by whether the bond is likely to be called? 1. If the bond is called, the capital gains yield will remain the same but the current yield will be different. II. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different. v. If the bond is called, the current yleld and the capital gains yield will remain the same. c. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. answer to two decimal places. is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called. II. If the bond is expected to be called, the appropriate expected total return is the YTM. III. If the bond is not expected to be called, the appropriate expected total return is the YTC. IV. If the bond is expected to be called, the appropriate expected total return will not change. V. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called. ast year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to YTM: % Would an investor be more likely to earn the YTM or the YTC? v-select- b Since the YTM is above the YTc, the bond is likely to be called. Since the YTC is above the YTM, the bond is likely to be called. Since the YrM is above the YTc, the bond is not likely to be called. Since the YTC is above the YTM, the bond is not likely to be called. Since the coupon rate on the bond has declined, the bond is not likely to be called. ent yield will be different. II. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yleld and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different. v. If the bond is called, the current yield and the capital gains yield will remain the same. c. What is the expected capital gains (or loss) yleld for the coming year? Use amounts calculated in above requirements for calculation, If required. answer to two decimal places. % Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called. II. If the bond is expected to be called, the appropriate expected total retum is the YTM. III. If the bond is not expected to be called, the appropriate expected total return is the YTC. IV. If the bond is expected to be called, the appropriate expected total return will not change. v. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called. nnual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,150. nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. the YTC? 'ent yield and to Table 7.1) Round your answer to two decimal places. ent yield will be different. copital gains yield will both be different. capital gains yield will remain the same but the coupon rate will be different. ain the same but the capital gains yield will be different. capital gains yield will remain the same. 1 for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value should be indicated by a minus slign. Round your expected to be called? the coming year does not depend on whether or not the bond is expected to be called. propriate expected total return is the YTM. - appropriate expected total return is the YTC. propriate expected total return will not change, or the coming year depends on whether or not the bond is expected to be called. TABLE7.1 Calculation of Current Yields, Capital Gains Yields, and Total Returns for 5%,8%, and 11% Coupon Bonds When the Market Rate Remains Constant at 8% 'Brokerage houses occasionally report a bond's current yield, defined as the annual interest payment divided by the current price. For example, if Allied's 8% coupon bonds were selling for $981.60, the current yield would be $80/$981.60=8.15%. Unlike the YTM or YTC, the current yield does not represent the actual retum that investors should expect because it does not account for the capital gain or loss that will be realized if the bond is held until it matures or is called. The current yield wa. popular before calculators and computers came along because it was easy to calculate. However, it can be misleading, and now it's easy enough to calculate the YTM and YTC. 3st year Carson Industries issued a 10 -year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 ears at a price of $1,060 and it sells for $1,150. What are the bond's nominal yleld to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: YTC: Would an investor be more likely to earn the YTM or the YTC? b. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yleld and to Table 7.1) Round your answer to two decimal places. % Is this yieid affected by whether the bond is likely to be called? 1. If the bond is called, the capital gains yield will remain the same but the current yleld will be different. II. If the bond is calied, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different. v. If the bond is called, the current yield and the capital gains yieid will remain the same. c. What is the expected capital gains (on loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if fequired. Negative yalue should be indicated by a minus sign. Hound your answer to two decimal places. Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called. 11. If the bond is expected to be called, the appropriate expected total return is the rTM. III. If the bond is not expected to be called, the appropnate expected total return is the rTc. IV. If the bond is expected to be called, the appropriate expected total retum will not change. v. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be calledi. year Carson Industries issued a 10 -year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called 5 at a price of $1,060 and it sells for $1,150. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answe o two decimal places. Would an investor be more likely to earn the \TM or the YTC? What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yleld and to Table 7.1) Round your answer to two decimal places. Is this yield affected by whether the bond is likely to be called? t. If the bond is called, the capital gains yield will remain the same but the current yield will be different. II. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is calied, the current yield and the capital gains yield will remain the same but the coupon rate will be different. Iv. If the bond is called, the current yield will remain the same but the capital gains yield will be different. v. If the bond is called, the current yleld and the capital gains yield will remain the same. c. What is the expected capital gains (or loss) veid for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative velue thould be indicated by a minus sign. Round your answer to two decimal places. Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called. 11. If the bond is expected to be called, the appropriate expected total return is the VTM. iif. If the bond is not expected to be called, the appropriate expected total return is the YTc. IV. If the bond is expecind to be called, the appropriste expected total return will not change. v. The expected capital gains (or loss) vieid for the coming year depends on whether or not the bond is expected to be calied. Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the band can be called in 6 years at a price of $1,060 and it sells for $1,150. a. What are the bond's nominal yield to maturity and its nominal yleld to call? Do not round intermediate calculations. Round your answers to two decimal piaces. rTM: % YTC: % Would an investor be more likely to earn the YTM or the MTC? b since the YTM is above the ric, the bond is likely to be called. Since the rTc is above the rTM, the bond is likely to be called. Since the YTM is above the ric, the bond is not likely to be called. Since the YTM is above the rTc, the bend is not likely to be called. since the ric is above the rTM, the bond is not likely to be called. L. If the bond is called, the capltal gains yield will remain the same but the current yleid will be different. II. If the bond is called, the current yleld and the copital gains yleld will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different. V. If the bond is called, the current yleld and the capital gains yield will remain the same. c. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value should be indicated by a minus sign, Round your answer to two decimal places. % Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yleld for the coming year does not depend on whether or not the bond expected to be calied. 11. If the bond is expected to be called, the sppropriate expected total return is the YTM. III. If the bond is not expected to be called, the appropriate expected total return is the VTC. IV. If the bond is expected to be called, the appropriate expected total return will not change. v. The expected capital gains for loss) yield for the coming year depends on whether or not the bond is expected to be called. 'Brokerage houses occasionally report a bond's current yield, defined as the annual interest payment divided by the current price. For example, if Allied's 8% coupon bonds were selling for $981.60, the current yield would be $80/$981.60=8.15%. Unlike the YTM or YTC, the current yield does not represent the actual retum that investors should expect because it does not account for the capital gain or loss that will be realized if the bond is held until it matures or is called. The current yield was popular before calculators and computers came along because it was easy to calculate. However, it can be misleading, and now it's easy enough to calculate the YTM and YTC. TABLE7.1 Calculation of Current Yields, Capital Gains Yields, and Total Returns for 5%,8%, and 11% C Constant at 8% - Uhing a financtal cakulator, the price of each bond is cakulated by enteping the data for N. UYR, PMT, and FV, then sohing for PV = the bonds value. "The expected ourrent yleid as calcutated as the annual interest divided by the price of the bond. "The epected capital gains yeld is cakulated as the difference between the end-of-ywar bond price and the beginning-of-year bond price divided by the beginining-of-y "The expected total ictum is the sum of the expected current yield and the expected capital gains viekd. ulated by entering the data for N. URR. PMT, and FN, then solving for PV = the bonds value. erest divided by the price of the bond. rence betwoen the end of-year bond price and the beginning-of-year bond price divided by the beginning-of-ywar bond price. ment yeld and the expected capital gains yeld. Complete an amortization schedule for a $48,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 9% compounded annually. If an amount is zero, enter " 0 ". Do not round intermediate calculations. Round your answers to the nearest cent. b. was percentage or tne payment represents interest and what percentage represents principal for each of the 3 years? Do not round intermediate calculations. Round your answers to two decimal places, why do these percentages change over time? 1. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. 11. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines. III. These percentages change over time because even though the total payment is constant the amount of interest pald each year is deciining as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases. v. These percentages do not change over time; interest and principal are each a constant percentage of the total payment