Hooper Printing Inc. has bonds outstanding with 24 years left to maturity. The b

Question

Hooper Printing Inc. has bonds outstanding with 24 years left to maturity. The bonds have an 12% annual coupon rate and were issued one year ago at their par value of $1,000 , but due to changes in interest rates, the bond's market price has fallen to $920.70 The capital gains yield last year was - 7.93%.

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

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

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

Explanation / Answer

a) CY = $120 / $920.70 = 13.034 % c) N = 24 I = YTM PV = -$920.70 PMT = 120 FV = 1000 I = YTM = 13.096% Expected Capital gains yield can be found as the difference between YTM and Current Yield. CGY = YTM - CY CGY = 13.096 - 13.034 CGY = 0.062% Round to Two decimal Places a) 13.03% c) 0.06% ; this one can be 0.07% if this answer is found after rounding the YTM and CY

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