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A 10-year, $1,000 par value bond has a 6.75% coupon rate with interest paid semiannually. The...

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Finance

A 10-year, $1,000 par value bond has a 6.75% coupon rate withinterest paid semiannually. The bond currently sells for $850. Whatis the capital gains yield on these bonds? Enter your answerrounded to two decimal places. Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as12.35 in the answer box.

Answer & Explanation Solved by verified expert
3.6 Ratings (314 Votes)

Capital Gains Yield= Current price-original price/Original price*100

                                    = $850 – $1,000/ $1,000*100

                                    = $150/ $1,000*100

                                    = 0.15*100

                                    = 15.

Therefore, the capital gains yield is 15.

In case of any query, kindly comment on the solution.
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A 10-year, $1,000 par value bond has a 6.75% coupon rate withinterest paid semiannually. The bond currently sells for $850. Whatis the capital gains yield on these bonds? Enter your answerrounded to two decimal places. Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as12.35 in the answer box.

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