7.10 Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have a 9% 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 $910.30. The capital gains yield last year was -8.97%.
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What is the yield to maturity?
=RATE(9,9%*1000,-910.30,1000)
=10.5946%
Expected current yield:
=9%*1000/910.30
=9.8869%
Expected capital gains yield: %
=10.5946%-9.8869%
=0.7077%
As rates change they will cause the end-of-year price to change and thus the realized capital gains yield to change. As a result, the realized return to investors will differ from the YTM.
7.10 Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have a 9% annual coupon rat...
Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have an 8% 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 $901.40. The capital gains yield last year was -9.86% 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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eBook Problem Walk-Through Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have a 9% 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 $910.30. The capital gains yield last year was -8.97%. a. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. b. For the...
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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Problem 7-10 Current yield, capital gains yield, and yield to maturity Pelzer Printing Inc. has bonds outstanding with 24 years left to maturity. The bonds have an 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? Round your answer to two decimal places....
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