Compute the capital gains yield

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Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled for six months from today.

a. If the yield on similar risk investments is 11 percent, what is the current market value (price) of the bond?

b. Compute the capital gains yield, current yield, and total yield that Jenna will earn if she holds the bond until it matures. Assume that the market rate does not change from now until maturity.

Reference no: EM131412088

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