Use the bond term's below to answer the question Maturity 12 years Coupon Rate 5% Face...
Use the bond term's below to answer the question
Maturity 12 years
Coupon Rate 5%
Face value $1,000
Annual Coupons
Market Interest Rate 7%
Assuming the YTM remains constant throughout the bond's life, what
is percentage capital gains/loss between periods 3 and 4 ?
A. 1.20%
B. 1.29%
C. 1.31%
D. 1.25%
Homework Answers
In period 3 Price=PV(7%,9,-5%*1000,-1000)=869.6953550
In period 4 Price=PV(7%,8,-5%*1000,-1000)=880.5740299
Capital gains
yield=880.5740299/869.6953550-1=1.25086041%
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