Final answer:
The bond yield to maturity for Victoria Inc. is approximately 12%. The current yield is approximately 6.67%. The bond's capital gain or loss in the first year is $50. The bond yield to call is approximately 17.52%.
Step-by-step explanation:
The bond yield to maturity is the annual rate of return an investor can expect to earn if they hold the bond until it matures. To calculate Victoria Inc.'s bond yield to maturity, we can use the present value formula. The bond sells for $900, so we can calculate the yield to maturity by finding the discount rate that makes the present value of the bond's cash flows equal to $900. Using the formula, we find that the bond yield to maturity is approximately 12%.
The bond current yield is the annual interest payment divided by the bond's market price. In this case, the bond has a semi-annual coupon payment of 12% of the $1000 par value, which is $60. The bond sells for $900, so the current yield is $60/$900, or approximately 6.67%.
The bond's capital gain or loss in the first year can be calculated by subtracting the bond's initial price from its price after one year. The bond's initial price is $900 and its price after one year can be calculated using the same present value formula mentioned earlier, but with the remaining 9 years and assuming the bond is still held until maturity. Let's assume the bond's price after one year is $950. Therefore, the capital gain or loss is $950 - $900, which is $50.
To calculate the bond yield to call, we can follow a similar process as before but use the call price of $1060 instead of the maturity value of $1000. Using this information, we can find the discount rate that makes the present value of the bond's cash flows equal to the call price of $1060. Solving for the discount rate gives us a yield to call of approximately 17.52%.