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What are the total return-the current yield

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Use the following information for following questions

A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is 10%.

Question 1: What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you about the relationship between rd and the bond's coupon rate?

Question 2: What are the total return, the current yield, and the capital gains yield for the discount bond in Question #1 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not default on the bond.)

Reference no: EM132455665

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