Pelzer Printing Inc. has bonds outstanding with 24 years left to maturity. The bonds have a 12% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $920.70. The capital gains yield last year was -7.93%.
%
Expected current yield: %
Expected capital gains yield: %
1.
=RATE(24,12%*1000,-920.70,1000)
=13.10%
2.
=12%*1000/920.70
=13.03%
3.
=13.10%-13.03%
=0.07%
4.
As long as promised coupon payments are made, the current yield
will change as a result of changing interest rates. However,
changing rates will cause the price to change and as a result, the
realized return to investors should equal the YTM.
Pelzer Printing Inc. has bonds outstanding with 24 years left to maturity. The bonds have a...
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Pelzer Printing Inc. has bonds outstanding with 24 years left to maturity. The bonds have a 12% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $920.70. The capital gains yield last year was -7.93% a. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. b. For the coming year, what...
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