In your portfolio, you have a premium bond from Pi Corporation that pays annual coupons at 8.7%. You also own a discount bond from Delta Inc. that pays 4.7% coupons annually.  

Both bonds have twelve years to maturity and a par value of $1,000.

The market (YTM) for both bonds is 6.7%.

Figure out how much money you will make by investing in bonds.

 a. What is the current yield for Bond Pi? For Bond Delta?

b.If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond Pi? For Bond Delta?

Answer rating: 100% (QA)

a The current yield for Bond Pi can be calculated by dividing the annual coupon payment by the bonds ... View the full answer