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Posted on Jul 20, 2024

Example: 10% coupon bond, with semiannual coupons, face value of 1,000, 20 years to maturity, $1,197.93 price Current yield = 100 / 1,197.93 = .0835

Example: 10% coupon bond, with semiannual coupons, face value of 1,000, 20 years to maturity, $1,197.93 price

Current yield = 100 / 1,197.93 = .0835 = 8.35%

Price in one year, assuming no change in YTM = 1,193.68

Capital gain yield = (1,193.68 1,197.93) / 1,197.93 = -.0035 = -.35%

YTM = 8.35 - .35 = 8%, which is the same YTM computed earlier

How did they find the price in one year assuming no change in YTM? My slide doesn't show me how and I need to know how to find it in order to understand the capital gain and YTM.

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