Homework Answers
Part A:
Current Yield = Coupon Amount / Bond Price
=( $ 1000 * 6% )/ $ 855.49
= $ 60 / 855.49
= 0.0701 i.e 7.01%
Part B: Capital Gain for Coming Year = Value After 1 Year - Current Price
Value after 1 Year = PV of Future CFs from it.
Capital Gain for Coming Year = Value After 1 Year - Current Price= $ 897.73 - 855.49
= $ 42.24
Pls comment, if any further assistance is required.
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