Victoria bond is a premium bond with 8% coupon. Houston bond is a 4 % coupon bond currently selling at a discount. Both bonds make annual payments and have a yield to maturity (YTM) of 6%, and have 8 years till maturity.

a. Estimate their prices (Bond prices).

b. Estimate their current yields.

c. If interest rates remain unchanged by next year, estimate their prices a year from now.

d. Estimate their first year capital gain yields. (Hint: CGY = (P1-P0)/P0)

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