tivity$-$ Bond Valuation

Excel Activity: Bond Valuation

Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds:

Bond A has a $6\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Bond B has a $9\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Bond $C$ has a $12\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Each bond has a yield to maturity of $9\%.$

The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Use a minus sign to enter negative values, if any. If an answer is zero, enter $"0".$

d Valuation

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c$.$ Calculate the current yield for each of the three bonds. $($Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.$)$ Round your answers to two decimal places.

Current yield $($Bond A$)$:

$\%$

Current yield $($Bond B$)$:

$9\mathrm{.}62$

$\%$

Current yield $($Bond C$)$:

$\%$

d$.$ If the yield to maturity for each bond remains at $9\%,$ what will be the price of each bond $1$ year from now? Round your answers to the nearest cent.

Price $($Bond A$)$:

Price $($Bond B$)$: $

Price $($Bond C$)$: $

What is the expected capital gains yield for each bond? What is the expected total return for each bond? Round your answers to two decimal places.

Bond A

Expected capital gains yield

Expected total return

Bond $B$

$\%$

$\%$

Bond C

$\backslash$table$[[\%,\%$