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A 10-year, $1,000 par value bond has a 6.75% coupon rate with interest paid semiannually. The...

A 10-year, $1,000 par value bond has a 6.75% coupon rate with interest paid semiannually. The bond currently sells for $825. What is the capital gains yield on these bonds? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

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Answer #1

Hence, yield to maturity is 9.5% (4.75%*2)

Current yield is 8.18% ($67.5/$825)

Hence, Capital gains yield is 1.32% (9.50%-8.18%)

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