Portion which represents the current yield


De'Andre purchased one of XXXL Shirt Company's bonds last year when the market interest rate on similar-risk bonds was 6 percent. When he purchased the bond, it had seven years remaining until maturity. The bond's coupon rate of interest (paid semiannually) is 5 percent, and its maturity value is $1,000. Today, the market rate on similar-risk bonds as the one De'Andre purchased one year ago is 4 percent. (a) If he were to sell the bond today, what return would De'Andre earn? (b) What portian of this return represents the capital gains, and what portion represents the current yield?

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Portion which represents the current yield
Reference No:- TGS041626

Expected delivery within 24 Hours