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    Bond's YTM, Current Yield, Capital Gain (Loss), and YTC

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    A 20-year, 8 % semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,000. (Assume that the bond has just been issued.)
    a) What is the bonds yield to maturity?
    b) What is the bond's current yield?
    c) What is the bond's capital gain or loss yield?
    d) What is the bond's yield to call?

    Please show work.

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    Solution Preview

    a) N = 20 * 2 = 40, PMT = 8% / 2 = 4% (1,000) = 40, FV = 1000, PV = -1000
    Using calculator:
    Therefore, YTM = 4 X 2 = 8%
    b) Current ...

    Solution Summary

    This solution is consisted of step-by-step calculations for the following question: A 20-year, 8 % semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,000. (Assume that the bond has just been issued.)
    a) What is the bonds yield to maturity?
    b) What is the bond's current yield?
    c) What is the bond's capital gain or loss yield?
    d) What is the bond's yield to call?

    $2.19

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