Consider a coupon bond with the following attributes: FV=$1000, C=$30, n=20. It's current price is $1200, and it is expected to sell next year at $1300.
a) Calculate the current yield. Give # and show all work (equation).
b) Calculate the rate of capital gains. Give # and show all work (equation).
c) Calculate the RET. Give # and show all work.
d) Is the interest rate today greater, equal, or lower than 3%? Discuss, providing economic reasoning.

Answer rating: 100% (QA)

Lets calculate the various components based on the attributes of the coupon bond a Current Yield is ... View the full answer