Question: You hold two bonds. You own a $1,000 face value bond from Company B that has 4.4% coupons paid once per year, and nine years
You hold two bonds. You own a $1,000 face value bond from Company B that has 4.4% coupons paid once per year, and nine years to maturity. The other is a $1,000 face value bond from A Corporation that has 8.4% coupons paid once per year, and nine years to maturity. The market (YTM) for both bonds is 6.4%. a. What is the current yield for Bond A? For Bond B? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.) b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B? (Hint: you will need to solve the price of each bond next year to find the capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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