How would you compute a bond’s capital gains yield, if you were given its yield to...
How would you compute a bond’s capital gains yield, if you were given its yield to maturity, coupon rate, and current yield?
Homework Answers
Capital Gains Yield for the Bond can be calculated by using the
formula:
CGY = (current yield – yield to maturity) / yield to maturity x
100
or,
CGY = (P1 - P0) / P0
where,
CGY is Bond Capital Gains Yield,
P0 is Current Bond Yield,
P1 is Yield to Maturity of the Bond.
Alternatively, Capital Gains Yield may be calculate as:
= P1/P0 - 1,
0r, ΔP/P0
where, 'ΔP' is the change in Bond price divided by the current Bond
price
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