Question: Five years ago Dynamic Systems issued a 15-year bond with a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. Today

  • Five years ago Dynamic Systems issued a 15-year bond with a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. Today the going interest rate is 10 percent, and it is ex- pected to remain at this level for many years in the future. Compute the (a) current yield and (b) capital gains yield that the bond will gener- ate in the fifth year (Year 5) of its life.

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