Bond A is a premium bond with a 9% coupon rate. Bond B is a 5% coupon bond currently selling at a discount. Both bonds make semi-annual payments, have a YTM of 7%, par value of $1,000 and have 10 years to maturity. a/ What is the current yield for bond A? Bond B?

b/ If after one year, interest rates rise to 8% for both bonds, what is the expected capital gain yields over the next year for bond A? for bond B?

Please write down the complete formula