Pacific Healthcare is an investor-owned hospital chain that owns and operates nine hospitals in Washington, Oregon, and northern California. Marcia Long, a recent graduate of a prominent health administration program, has just been hired by Washington Medical Center, Pacific's largest hospital. Like all new management personnel, Marcia must undergo three months of intensive indoctrination at the system level before joining the hospital. Marcia began her indoctrination in January 2014. Her first assignment at Pacific was to review its latest annual report. This was a stroke of luck for Marcia because her father owned several bonds issued by Pacific, and Marcia was especially interested in whether or not her father had made a good investment. To glean more information about the bonds, Marcia examined Note E to Pacific's consolidated financial statements, which lists the company's long-term debt obligations, including its first mortgage bonds, installment contracts, and term loans. Table 14.1 contains information on four of the first mortgage bonds listed in Pacific's annual report. All four bonds pay interest semi-annually. Pacific's chief financial officer, Hugo Welsh, found out about Marcia's interest in the firm's debt financing. Because you are so interested in our financial structure, he said, I want you to do the bond valuation and make a presentation to our executive committee. Hugo then asked Marcia to perform the calculations required to complete Exhibit 14.2 and to think about some of the questions that members of the committee might ask her about the numbers.

Pacific Healthcare: Long-term Bond Stated (Nominal) Yields

Face Amount	Annual YTM	2014 Coupon Payments	2014 Current Yield	1/1/2015 Expected Price	2014 Cap Gain Yield	2014 Total Yield
$48,000,000	19.26%	$45	5.62%	$833	-16.7%	-12.2%
$32,000,000	20%	$82.50	9.53%	$870	-13%	-4.57%
$100,000,000	20.36%	$126.25	10.35%	$1218	21.8%	34.42%
$64,000,000	20.36%	$750	9.87%	$750	-25%	-17.62

QUESTION:At the meeting, a committee member asks The two 25-year bonds have the same maturity date, so why do the current yields and capital gain yields of these bonds differ? What do you reply to the committee member?