Problem:
Consider a bond that makes coupon payments in the following manner: no coupon payments are made for 6 years; after that, the coupon rate will be 5% for 5 years; after that, the coupon rate will be 10% for 8 years. Coupon payments are made annually. The bond matures in 19 years and face value is $12,000.
Required:
Question 1: What is the value of the bond?
Question 2: Find the current yield and capital gains yield for EACH year of the bond. Explain what you observe.
Note: Please provide step by step solution.