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if a U.S. corporate bond is selling at a premium $1050 has a YTM of 5.35%...

if a U.S. corporate bond is selling at a premium $1050 has a YTM of 5.35% and pays a coupon of 6%, what is the capital gains yield?
a. -0.36%
b. 0.36%
c. -0.65%
d. 0.65%
e. -0.18%

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Answer #1

Solution: -

Current yield = coupon amount/Selling price

= 60/1050 = 5.7143%

YTM = Current yield + Capital gain yield

Capital gain yeild = YTM - Current yield = 5.35% - 5.7143%

= - 0.36%

Therefore correct answer is (A)

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