Wee Beastie Animal Farm bonds have 7 years to maturity and pay an annual coupon at...

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Wee Beastie Animal Farm bonds have 7 years to maturity and pay an annual coupon at...

Wee Beastie Animal Farm bonds have 7 years to maturity and pay an annual coupon at the rate of 6.4 %

The face value of the bonds is $ 1,000 The price of the bonds is $ 1,064.17 to yield 5.23 %

What is the capital gain yield on the bonds?

The capital gain yield is:

A.+0.73

B.+0.76%

C.−0.87%

D.−0.77%

E.- 0.69 %

business finance

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Answer 1

Answer #1

Answer is -0.77%

Face Value = $1,000
Current Price = $1,064.17

Annual Coupon Rate = 6.40%
Annual Coupon = 6.40% * $1,000
Annual Coupon = $64

Dividend Yield = Annual Coupon / Current Price
Dividend Yield = $64 / $1,064.17
Dividend Yield = 0.0600 or 6.00%

Yield to Maturity = 5.23%

Capital Gain Yield = Yield to Maturity - Dividend Yield
Capital Gain Yield = 5.23% - 6.00%
Capital Gain Yield = -0.77%

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Answer 2

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