Question

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?

Homework Answers

Answer #1
Capital gain or loss yield = Yield to maturity - Dividend yield
= 7.20% - 10.01%
= -2.81%
Working:
# 1 Calculation of yield to maturity:
Yield to maturity = =rate(nper,pmt,pv,fv)*2
= 7.20%
Where,
nper 5*12/6 10
pmt 1000*12%*6/12 $         60.00
pv $ -1,198.50
fv $   1,000.00
# 2 Calculation of dividend yield :
Dividend yield = Annual dividend/Current Price
= (1000*12%)/1198.50
= 10.01%
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