Bond p is a premium bond with a 12 percent coupon bond d is


Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have five years to maturity. Assume these bonds have a face value of $1,000.

A. What is the current yield for bond P? For bond D?

B. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? For bond D?

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Financial Management: Bond p is a premium bond with a 12 percent coupon bond d is
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