A 3-year, $3,000 face value bond has a coupon rate of 7%. The current yield of this bond is 5.083% from year 2 to year 3 (as calculated at year 2 right after the 2nd coupon payment). Given that the market rate stayed the same throughout the lifetime of this bond, what were the capital gains yield and current yield at the time of issue (year 0)?

Answer rating: 100% (QA)

To solve this problem we need to find the initial capital gains yield and current yield at the time ... View the full answer