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Bond P is a premium bond with a 8% coupon. Bond D is a 3% coupon bond currently selling at a discount. Both bonds make
Bond P is a premium bond with a 8% coupon. Bond D is a 3% coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 5% percent , and have 10 yrs to maturity. What is the current yield for Bond P? For Bond D? If the interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D? What is the holding period return of the 1st year for each bond? Explain the answers and the interrelationship among the various types of yields.
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