Question

Goofy Inc.'s bonds currently sell for $925. They pay a $80 annual coupon, have a 25-year...

Goofy Inc.'s bonds currently sell for $925. They pay a $80 annual coupon, have a 25-year maturity, and a $1,000 par value. Compute the expected capital gain percentage for this year.   (State as a percent, but do not include the percent sign and round to the second decimal place. Thus, 9.8765% would be written as 9.88 to be correct). (Hint: first compute the YTM and then find the capital gain.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Par Value = $1,000
Current Price = $925
Annual Coupon = $80
Time to Maturity = 25 years

Let Annual YTM be i%

$925 = $80 * PVIFA(i%, 25) + $1,000 * PVIF(i%, 25)

Using financial calculator:
N = 25
PV = -925
PMT = 80
FV = 1000

I = 8.75%

Yield to Maturity = 8.75%

Dividend Yield = Annual Coupon / Current Price
Dividend Yield = $80 / $925
Dividend Yield = 0.0865 or 8.65%

Capital Gain Yield = Yield to Maturity - Dividend Yield
Capital Gain Yield = 8.75% - 8.65%
Capital Gain Yield = 0.10%

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
Goofy Inc.'s bonds currently sell for $875. They pay a $80 annual coupon, have a 25-year...
Goofy Inc.'s bonds currently sell for $875. They pay a $80 annual coupon, have a 25-year maturity, and a $1,000 par value. Compute the expected capital gain percentage for this year. (State as a percent, but do not include the percent sign and round to the second decimal place. Thus, 9.8765% would be written as 9.88 to be correct). (Hint: first compute the YTM and then find the capital gain.
Currently, Bruner Inc.'s bonds sell for $1,110. They pay a $120 annual coupon, have a 15-year...
Currently, Bruner Inc.'s bonds sell for $1,110. They pay a $120 annual coupon, have a 15-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and...
Liberty Inc.'s semi-annual bonds currently sell for $1,175. The annual coupon rate is 12.5%. the bonds...
Liberty Inc.'s semi-annual bonds currently sell for $1,175. The annual coupon rate is 12.5%. the bonds have a 15-year maturity, and a $1,000 par value, but they can be called in 6 years at $1,080. Assume that no costs other than the premium would be incurred to call and refund the bonds, also assume the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bonds YTM and...
McCue Incis bonds currently sell for $1,100. They pay a $90 annual coupon, have a 25-year...
McCue Incis bonds currently sell for $1,100. They pay a $90 annual coupon, have a 25-year maturity, and al $1,000 par value, but they can be called in 5 years at $1,050. Assume that interest rates expected te remain at curent levels on into the future. What is the difference between these bonds' YTMs and YIC 0.99% 1.11% 0.66% 0.77% 0.88%
ABC's Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay...
ABC's Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?
Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an    annual coupon...
Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an    annual coupon rate of 8.0%, and a par value of $1,000. What is their yield to maturity?
Ezzell Enterprises' noncallable bonds currently sell for $1,203.75. They have a 5-year maturity, semi-annual coupon rate...
Ezzell Enterprises' noncallable bonds currently sell for $1,203.75. They have a 5-year maturity, semi-annual coupon rate of 12.00%, and a par value of $1000. What is the bond's capital gain or loss yield?
Ezzell Enterprises' noncallable bonds currently sell for $1,198.50. They have a 5-year maturity, semi-annual coupon rate...
Ezzell Enterprises' noncallable bonds currently sell for $1,198.50. They have a 5-year maturity, semi-annual coupon rate of 12.00%, and a par value of $1000. What is the bond's capital gain or loss yield?
De Costa Company’ bonds currently sell for $990. They have a 5-year maturity, an annual coupon...
De Costa Company’ bonds currently sell for $990. They have a 5-year maturity, an annual coupon rate of 8.25 percent, and a par value of $1,000. What is their current yield? 8.15% 8.59% 9.02% 8.98% 8.33%
Sadik Inc.'s bonds currently sell for $1,470 and have a par value of $1,000. They pay...
Sadik Inc.'s bonds currently sell for $1,470 and have a par value of $1,000. They pay a $65 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,000. What is their yield to call (YTC)? Question 15 options: a) 6.89% b) 5.89% c) 5.18% d) -2.27% e) 6.30%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT