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Estimate victorias first year capital gain yields

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Reference no: EM131104803

Victoria bond is a premium bond with 8% coupon. Houston bond is a 4 % coupon bond currently selling at a discount. Both bonds make annual payments and have a yield to maturity (YTM) of 6%, and have 5 years till maturity.

a. Estimate their prices (Bond prices).

b. Estimate their current yields.

c. If interest rates remain unchanged by next year, estimate their prices a year from now.

d. Estimate their first year capital gain yields. Hint: CGY = (P1-P0)/P0

Reference no: EM131104803

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