Problem:
One year ago Clark Company issued a 8-year, 9% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 4 years at a price of $963, and it now sells for $938.11.
- The bond's nominal yield to maturity is 10.28%
- The bond's nominal yield to call is 10.16%
- The current yield is 9.59%
Required:
Question: What is the expected capital gains (or loss) yield for the coming year?
Note: Provide support for your underlying principle.