Question
Bond P is a premium bond with a coupon rate of 13 percent. Bond D has a coupon rate of 8 percent and is currently
Bond P is a premium bond with a coupon rate of 13 percent. Bond D has a coupon rate of 8 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 10 percent, and have six years to maturity.
I calculated the current yields to be Bond P 11.50% and Bond D 8.76%. These answers are correct, but I am getting stumped on the second part, which asks:
If interest rates remain unchanged, what is the expected capital gains yield (answer is a percentage) over the next year for Bond P and Bond D?(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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