Calculate the estimation of the expected current yield

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A non-callable bond has another 14 years to maturity. It carries a 6.3% annual coupon, and a RM 1000 par value. An investor plans to buy and hold it for only four years. The required return of this investor is 5.2% per annum. The yield curve data indicates that the market expects that in four years, the yield to maturity on a 10-year bond with similar risk will be 6.7%.

Problem 1: Based on the available information, estimate the maximum bond price that this investor is willing to pay today.

Problem 2: Calculate the estimation of the expected current yield and capital gain of the bond in the first year based on the bond price calculated above.

Reference no: EM132941835

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