Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,200 a. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM YTC: % Would an investor be more likely to earn the YTM or the YTC? -Select- b. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places. Is this yield affected by whether the bond is likely to be called? 1. If the bond is called, the capital gains yield will remain the same but the current yield will be different. II. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different. V. If the bond is called, the current yield and the capital gains yield will remain the same. -Select- c. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value should be Indicated by a minus sign. Round your answer to two decimal places Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be callech IL. If the bond is expected to be called, the appropriate expected total return is the YTM III. If the bond is not expected to be called, the appropriate expected total return is the YTC. IV. If the bond is expected to be called, the appropriate expected total return will not change. V. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,200. a. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: YTC: Would an investor be more likely to earn the YTM or the YTC? the current yled and to Table 7.1) Round your answer to two decimal places. Since the YTM is above the YTC, the bond is likely to be caled Since the YTC is above the YTM, the band is likely to be called Since the YTM is above the YTC, the bond is not likely to be called Since the YTC is above the YTM, the bond is not likely to be called Since the coupon rate on the brand has decine, the band stay to be called 1-Select- b. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places % Is this yield affected by whether the bond is likely to be called? 1. If the bond is called, the capital gains yield will remain the same but the current yield will be different. 11. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. IV. If the bond is called, the current yield will remain the same but the capital gains yield will be different V. If the bond is called, the current yield and the capital gains yield will remain the same. Select expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value sh a minus sign. Round your answer to two decimal places. 11 IN mycie dependent on whether the bond is expected to be called? nennt denend on whether or not the bond is expected to be callech Is this yield dependent on whether the bond is expected to be called? 1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be callech IL. If the bond is expected to be called, the appropriate expected total return is the YTM III. If the bond is not expected to be called, the appropriate expected total return is the YTC. IV. If the bond is expected to be called, the appropriate expected total return will not change. V. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called -Select IV
