problem solving question #1-

Part-1- Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have a 9% 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 $905.35. The capital gains yield last year was -9.465%.

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? (Do not round intermediate calculations. Round your answers to two decimal places.Expected current yield: ___________ %Expected capital gains yield: ___________ %

C- Will the actual realized yields be equal to the expected yields if interest rates change? If not, how will they differ?

I- As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors should equal the YTM.

II- As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will not cause the price to change and as a result, the realized return to investors should equal the YTM.

III- As rates change they will cause the end-of-year price to change and thus the realized capital gains yield to change. As a result, the realized return to investors will differ from the YTM.

IV- As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors will differ from the YTM.

V- As long as promised coupon payments are made, the current yield will not change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors should equal the YTM.

Part 2- A 6% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 6.8374%. What are the bond's price and YTM? Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places.

Bonds price: $________

YTM: __________%