Suppose that Victoria issues two bonds with identical coupon rates and maturity dates. One bond is callable, however, the other is not. Which bond will sell at a higher price?

Consider an 8% coupon, 30-year maturity bond with a par value of $1,000 paying 60 semiannual coupon payments of $40 each. The yield to maturity for this bond is 8%. Estimate capital gains if the yield goes to 12% next year.

What the first-year current yield is for the Victoria bond if the yield goes to 12 %?