Question
Meade Corporation has 6-year, $1,000 par value bonds that have a yield to maturity of 8.5% and a 10% coupon rate based on semi-annual payments.
Meade Corporation has 6-year, $1,000 par value bonds that have a yield to maturity of 8.5% and a 10% coupon rate based on semi-annual payments. What are the current yield and capital gains yields on the bonds for this year? {Note: you must determine the price of the bond first.} a. Current yield = 8.50%; capital gains yield = 1.50% b. Current yield = 9.35%; capital gains yield = 0.65% c. Current yield = 9.35%; capital gains yield = -0.86% d. Current yield = 10.00%; capital gains yield = 0.00% e. Current yield = 10.50%; capital gains yield = -1.50%
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