Question
Bond A has 10% annual coupons and bond B has 6% annual coupons. Each bond matures in 10 years and is priced today for a
Bond A has 10% annual coupons and bond B has 6% annual coupons. Each bond matures in 10 years and is priced today for a YTM of 8%. If the market interest rate over the next year is unchanged, find the current yield, the capital gains yield, and the total yield for each bond over the coming year. (Hint: The capital gains yield is given by (ending price beginning price)/beginning price.)
.....For the life of me I can't figure out how to get the capital gains yield.... The answer for bond A is -0.8164% but I have no clue how to get there. Have been trying to figure it out for about 3 hours now. Please help
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started