One year ago a Sunny Communications $1,000 face value, 6-year bond sold for $889. Investors who bought this particular bond will be paid interest equal to $40 every six months. Market interest rates did not change until a few days ago when they decreased significantly. Today the price of the bond is $1,042.

1. What was the bonds yield to maturity one year ago?

2. What is the bonds yield to maturity today?

3. What return did investors who bought the bond on one year ago earn if they sold the bond today for $1,042? What were the capital gains yield and the current yield on the bond during the year?

4. Compute the value of the bond one year from today assuming interest rates do not change.

5. What return would investors earn during the next 12 months? What would be the capital gains yield and the current yield

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