Consider a $1,000 par value investment grade corporate bond which currently has a Yield to Maturity, YTM, of 5.475%. The bond has an annual coupon rate of 7.625% and is currently selling for 115.247%
First, calculate the bond’s annual interest payment.
Now calculate the bond’s PV, that is, 115.247% of its par value.
Given the two calculations you just completed, use them to find the current yield here.
If the YTM is 5.475%, and given the current yield that you calculated above, what is the Capital Gain or (LOSS). Show the work below by setting up the calculation labeling the current yield and its value, the capital gain or (loss) and its value, and the YTM of 5.475%
Was this bond selling at a premium or a discount?? Circle your answer