What portion of the return represents the capital gains

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Reference no: EM13329163

De'Andre purchased one of XXXL Shirt Company's bonds last year when the market interest rate on similar-risk bonds was 6 percent. When he purchased the bond, it had 7 years remaining until maturity. The bond's coupon rate of interest (paid semi-annualy) is 5 percent, and its maturity value is $1000. Today, the market rate on similar risk bonds as the one De'Andre purchased one year ago is 4 percent.

(A) If he were to sell the bond today, what return would De'Andre earn?

(B) What portion of this return represents the capital gains, and what portion represents the current yield?

Reference no: EM13329163

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