5. Problem 7.10 (Current Yield, Capital Gains Yield, and Yield to Maturity)

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 $908.30. The capital gains yield last year was -9.17%.

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 are the expected current and capital gains yields? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1.) Do not round intermediate calculations. Round your answers to two decimal places. Expected current yield: %

Expected capital gains yield: %