Hooper Printing has bonds outstanding with 15 years left to maturity. You are en

Question

Hooper Printing has bonds outstanding with 15 years left to maturity. You are entitled to 15 more interest payments since the bonds have an 8% semi annual coupon. Par value at issue is since last year. The capital gain yield last year was +6.25%. A) how much is the yield to maturity for this bond? B) For the current year, how much is the current yield? C) For the current year, how much is the capital gains yield? D) If the bond was callable in year in year 18 ( 3 years from now) how much is the yield to call if you bought today?

Explanation / Answer

N= 9,

FV= $1,000,

PV= -$901.40,

PMT= 8% * $1,000 = $80

implying thatYTM = I/YR=9.691%

Expected Current Yield= $80/$901.40 = 8.875%

andExpected Capital Gains Yield= 9.691% - 8.875% = 0.816%

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