Current yield-capital gains yield and yield to maturity

Assignment Help Financial Management

Reference no: EM131606354

Current yield, capital gains yield, and yield to maturity

Pelzer Printing Inc. has bonds outstanding with 10 years left to maturity. The bonds have an 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 $950.70. The capital gains yield last year was -4.93%.

What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.

For the coming year, what is the expected current yield? (Hint: Refer to footnote 7 for the definition of the current yield and to Table 7.1.) Do not round intermediate calculations. Round your answer to two decimal places.

For the coming year, what is the expected capital gains yield? (Hint: Refer to footnote 7 for the definition of the current yield and to Table 7.1.) Do not round intermediate calculations. Round your answer to two decimal places.

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

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.

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.

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.

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.

Reference no: EM131606354

Questions Cloud

Write a paper detailing a current louisiana medicaid program : Write a 7-10 page paper detailing a current "Louisiana Medicaid Program". explain how the data is analyzed/interpreted.

How will ab a and b report the income and loss items : Assuming AB qualifies as an S-corporation for 2015, how will AB, A and B report the income and loss items

List name of each branch that has at least nine employees : List the name of each branch that has at least nine employees.

Statement of professional and educational intent : The statement should explain how educational, professional, and volunteer experience has prepared the candidate to succeed in the program.

Current yield-capital gains yield and yield to maturity : Pelzer Printing Inc. has bonds outstanding with 10 years left to maturity. what is the expected current yield? What is the yield to maturity?

How much did he pay : Jackson purchased $500 of goods and received credit terms of 2/10, n/30. How much did he pay if payment was made during the discount period

Correlation is a statistical concept : Correlation is a statistical concept, as you may have already known or will learn through our discussions.

Examine the multiple points-of-view and weigh the evidence : Examine the multiple points-of-view and weigh the evidence. Identify any unsupported assumptions or holes in the argument.

Shares of fedex to diversify your portfolio : What type of order should you give your broker if you want to buy shares of FedEx to diversify your portfolio.

User Account

All Pages