Current yield-capital gains yield and yield to maturity

Assignment Help Financial Management

Reference no: EM131867915

Current yield, capital gains yield, and yield to maturity

Hooper Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have an 8% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $901.40. The capital gains yield last year was - 9.86%.

What is the yield to maturity? Round your answer to two decimal places._______%

For the coming year, what is the expected current yield? Round your answer to two decimal places.___________ %

For the coming year, what is the expected capital gains yield? Round your answer to two decimal places. _________%

Will the actual realized yields be equal to the expected yields if interest rates change? If not, how will they differ? choose correct answer below

As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors will differ from the YTM.

As long as promised coupon payments are made, the current yield will not change as a result of changing interest rates. However, changing rates will cause the price to change and as a result, the realized return to investors should equal the YTM.

As long as promised coupon payments are made, the current yield will change as a result of changing interest rates. However, changing rates will not cause the price to change and as a result, the realized return to investors should equal the YTM.

As rates change they will cause the end-of-year price to change and thus the realized capital gains yield to change.As a result, the realized return to investors will differ from the YTM.

Reference no: EM131867915

Questions Cloud

Evaluating different silicon wafer milling machines : You are evaluating two different silicon wafer milling machines. compute the EAC for both machines.

Compute the true apr for this loan : The index was 1% at the time of origination. Tim also had to pay 1 point for this loan. Compute the true APR (annualized IRR) for this loan.

What is the project payback period : An investment project provides cash inflows of $875 per year for eight years. What is the project payback period if the initial cost is $7,900?

After the dividend has been paid out : If dividends are paid annually on October 17, what is the fair price per share for XYZ on October 17, 2017 after the dividend has been paid out?

Current yield-capital gains yield and yield to maturity : What is the yield to maturity? For the coming year, what is the expected current yield? For the coming year, what is the expected capital gains yield?

The appropriate rate of interest : Would you pay $829 for one of these bonds if you thought that the appropriate rate of interest was 12% -that is, if kd = 12%?

Calculate each project npv using the firm cost of capital : Calculate each project's NPV using the firm's cost of capital (discount rate) of 8 %. If you apply the NPV criterion, which investment will you choose? Why?

What is tim monthly mortgage payment : What is Tim’s monthly mortgage payment going to be during the 1st 3 years?

What is the annualized IRR of refinancing for Tom assuming : What is the annualized IRR of refinancing for Tom assuming he prepays the new loan 5 years after refinancing?

User Account

All Pages