Question

Problem 7-32 Components of Bond Returns (LO2) 

Bond P is a premium bond with a coupon rate of 12 percent. Bond D has a coupon rate of 3 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have nine years to maturity. 

a. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 

b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 

a.	Bond P current yield		%
	Bond D current yield		%
b.	Bond P capital gains yield		%
	Bond D capital gains yield		%

Answer 1