Refer to Additional Problems 1 and 2 (already solved below). What would the total expected return for the bond be?

1. The Broomfield Bricklayers has a bond issue outstanding with an annual coupon rate of 9%. The par value of the bond is $1,000. Calculate the current yield of the bond if the bonds current price was $974. See pages 174176.

Par Value of Bond: $1,000, Current Bond Price: $974, Annual Coupon Rate: 9%, Annual Coupon Payment: $1,000 x 9% = $90

Current Yield = Annual Coupon Payment / Current Bond Price = 90 / 974 x 100 = 9.24%

2. Refer to Additional Problem 1. If the sale price of this bond was $1,103 a year later, what is the capital gains yield? See pages 174176.

Bond Price today (T0): $974, Bond Price 1 year later (T1): $1,103

Capital Gains = Bond prices at (T1 T0) = ($1,103 - $974) = $129

Capital Gains Yield = Capital Gains / Bond Price at T0 = $129 / $974 x 100 = 13.24%