Question

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11. Abond has a face value of $800 and a 5% coupon rate, its current price is $740, and it is expected to increase to $770 next year. The current yield is _%. (Enter your response rounded to one decimal place.) The expected rate of capital gain is %. (Enter your response rounded to one decimal place.) The expected rate of return is %. (Enter your response rounded to one decimal place.)

Answer 1

current yield

=coupon/current price

=(800*5%)/740

=5.41%

expected rate of capital gain

=(770-740)/740

=4.05%

expected rate of return is

=((800*5%)+(770-740))/740

=9.46%

the above is answer..