Problem 6-31 Components of Bond Returns [LO 2]

Bond P is a premium bond with a coupon rate of 8.6 percent. Bond D is a discount bond with a coupon rate of 4.6 percent. Both bonds make annual payments, have a YTM of 6.6 percent, and have eleven years to maturity.

Requirement 1:

What is the current yield for bond P? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current yield

%

Requirement 2:

What is the current yield for bond D? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current yield

%

Requirement 3:

If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P?(Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

Capital gains yield

%

Requirement 4:

If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D?(Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Capital gains yield

%