Use the following information to answer question 9 to 12.

The HUANG Company currently has one bond issue outstanding. This bond pays a coupon rate of 6% ($60 per year) and matures in five years, and has a par value of $1,000. If you require a 14% rate of return,

How much would you be willing to pay for each of HUANG Company's bonds? (Assuming this is an annual bond).

a. 725.353

b. 796.258

c. 715.851

d. 736.489

e. 745.696

What is the current yield (not yield) of this bond in the first year?

9.679%

8.923%

c. 8.272%

d. 8.563%

e. 6.987%

What is the capital gain yield of this bond in the first year?

6.896%

7.9855

6.236%

d. 4.963%

e. 5.7285%

Suppose interest rates were to drop from 14% to 8% tomorrow. What percentage increase in value would occur for each bond due to the drop in interest rates? (Calculate the capital gain of each bond and express it as a percentage of the bond value obtained above.)

a. 26.855%

b. 31.633%

c. 19.587%

d. 29.656%

e. 17.986%