"A" bond is a premium bond with 8% coupon. Houston bond is a 4 % coupon bond currently selling at a discount. Both bonds make annual payments and have a yield to maturity (YTM) of 6%, and have 5 years till maturity.
A. Estimate their prices (Bond prices).
B. Estimate their current yields
C. If interest rates remain unchanged by next year, estimate their prices a year from now.
D. Estimate their first year capital gain yields. Hint: CGY = (P1-P0)/P0.