Question

What is the Capital Gain/Loss Yield (CGY) on an 8-year, 6% annual coupon, par value bond...

What is the Capital Gain/Loss Yield (CGY) on an 8-year, 6% annual coupon, par value bond that costs $800 today?

(Answer as a whole number percentage - i.e. 7.25, not 0.0725)

(Solve for the CY and YTM)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Face Value = $1,000
Current Price = $800

Annual Coupon Rate = 6%
Annual Coupon = 6%*$1,000 = $60

Time to Maturity = 8 years

Let annual YTM be i%

$800 = $60 * PVIFA(i%, 8) + $1,000 * PVIF(i%, 8)

Using financial calculator:
N = 8
PV = -800
PMT = 60
FV = 1000

I = 9.71%

Annual YTM = 9.71%

Dividend Yield = Annual Coupon / Current Price
Dividend Yield = $60 / $800
Dividend Yield = 0.075 or 7.5%

Capital Gains Yield = Annual YTM – Dividend Yield
Capital Gains Yield = 9.71% - 7.5%
Capital Gains Yield = 2.21%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the YTM on an 8-year, 6% annual coupon, par value bond that costs $800...
What is the YTM on an 8-year, 6% annual coupon, par value bond that costs $800 today? Group of answer choices 3.51% 9.71% 6.00% 7.91%
What is the current yield for a Bond with a $1,000 par value bond, with an...
What is the current yield for a Bond with a $1,000 par value bond, with an 10% annual coupon that matures in 15 years if the interest rate is 8%? (Answer as a whole number percentage - i.e. 7.25, not 0.0725)
1.A 6% annual coupon bond (par=$1,000) with 15 years to maturity is selling for $1,050. a.What...
1.A 6% annual coupon bond (par=$1,000) with 15 years to maturity is selling for $1,050. a.What is the bond’s Yield-to-Maturity (YTM)? b.What is the bond’s current yield (CY)? c.What is the bond’s capital gains rate or yield (CGY)?
A 6% coupon, 24-year annual bond has a yield to maturity of 4.4%. Assuming the par...
A 6% coupon, 24-year annual bond has a yield to maturity of 4.4%. Assuming the par value is $1,000 and the YTM does not change over the next year, what will the price of the bond be today? What will the bond price be in one year? What is the capital gains yield for this bond?
A 8.3% coupon, 8-year annual bond has a yield to maturity of 6.3%. Assuming the par...
A 8.3% coupon, 8-year annual bond has a yield to maturity of 6.3%. Assuming the par value is $1,000 and the YTM does not change over the next year, what will the price of the bond be today? What will the bond price be in one year to nearest cent? What is the capital gains yield for this bond?
Price the following: 12-year, $1000 par value, 6% semi-annual coupon bond whose current nominal yield-to-maturity (YTM)...
Price the following: 12-year, $1000 par value, 6% semi-annual coupon bond whose current nominal yield-to-maturity (YTM) is 8%. 10-year, $1000 par value, 8% quarterly coupon bond whose current nominal YTM is 7%. 30-year, $1000 par value, zero-coupon bond whose current nominal YTM is 9.5%. 13-year, $1000 par value, 8% monthly coupon bond whose current nominal YTM is 10%. 5-year, $500 par value, 8% semi-annual coupon bond whose current nominal YTM is 8.25%
One year ago, an investor purchased a 10-year, $1,000 par value, 8% semiannual coupon bond with...
One year ago, an investor purchased a 10-year, $1,000 par value, 8% semiannual coupon bond with an 8% yield to maturity. Now, one year later, interest rates remain unchanged at 8%. If the investor sells the bond today (immediately after receiving the second coupon payment, and with no transaction costs), he will have: A. a capital gain of $80. B. a capital loss of $80. C. no capital gain or loss.
Determine the yield to maturity of an 8-year zero coupon bond ($1,000 par value) that is...
Determine the yield to maturity of an 8-year zero coupon bond ($1,000 par value) that is currently selling for $521. (Input your answer as a whole number. For example: 6.25% = 6.25)
Find the yield to maturity for a 15-year, 8% annual coupon rate, $1,000 par value bond...
Find the yield to maturity for a 15-year, 8% annual coupon rate, $1,000 par value bond if the bond sells for $1,218 currently? We assume that interest is paid on this bond annually. 2.90% 5.79% 6.64% 6.86% Using the information from above, calculate the bond’s current yield. 6.20% 6.57% 6.80% 7.18% Using the information from Question 43 and 44, calculate the bond’s capital gain yield. -0.78% 0.78% 6.22% 6.57%
One year ago, you purchased a 6-year, 8% coupon bond at a YTM of 11%. Today...
One year ago, you purchased a 6-year, 8% coupon bond at a YTM of 11%. Today (one year later) you sold the bond at a YTM of 15%. What was your percentage capital gain on this investment?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT