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CURRENT YIELD, CAPITAL GAINS, AND YIELD TOMATURITY Hooper Printing Inc. has bonds outstandingwith 9 years left to maturity. The bonds have an 8% annualcoupon rate

CURRENT YIELD, CAPITAL GAINS, AND YIELD TOMATURITY Hooper Printing Inc. has bonds outstandingwith 9 years left to maturity. The bonds have an 8% annualcoupon rate and were issued 1 year ago at their par value of$1,000. However, due to changes in interest rates, thebonds market price has fallen to $901.40. The capitalgains yield last year was -9.86%.

a. What is the yieldto maturity?

b. For the coming year, what arethe expected current and capital gains yields?

(Hint: Refer to footnote 8 for the definition of thecurrent yield and to Table 7-1.)

c. Will the actualrealized yields be equal to the expected yields if interest rateschange? If not, how will they differ?

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