Question

**** I have the answers only need the formulas to properly solve **** THANK YOU!!!!!!!!!!!!!!!!

4)Cosmos issued a new series of bonds on January 1, 1995. The bonds were sold at par ($1,000), had a 12% coupon, and mature in 30 years, on December 31, 2024. Coupon payments are made semiannually (on June 30 and December 31). On July 1, 2018, 6.5 years before maturity, Cosmos’s bonds sold for $916.42.

What was the current yield at that time?=13.09

On July 1, 2018, 6.5 years before maturity, Cosmos’s bonds sold for $916.42. What was the capital gains yield at that time =0.91

On July 1, 2018, 6.5 years before maturity, Cosmos’s bonds sold for $916.42. What was the total return at that time? =14

Answer 1

The following are the formulae to solve the question :-

$\small \textrm{Current Yield = }\frac{\textrm{Annual Interest}}{\textrm{Current Bond Price}}$

$\small \textrm{Capital Gains Yield = }\frac{P_{1}-P_{0}}{P_{0}}$

        were, P₁ = Current Bond Price

                  P₀ = Initial Bond Price

$\small \textrm{Total Return = }\textrm{Current Yield + Capital Gains Yield}$