Question

A 20-year, $1,000 par value bond has a 7.50% coupon rate with interest paid semiannually. The bond currently sells for $900.00. What is the capital gains yield on these bonds?

Answer 1

11.11%

Step-by-step explanation:

Calculate the difference between the current price and the par value of the bond

Difference= Par value - Current price

=$1000.00 - $900.00

=$100.00

Calculate the capital gains yield as a percentage.

Capital gains yield= (Difference / Current price)* 100

=( $100.00 / $900.00)* 100

= 11.11%