Problem
Bond P is a premium bond with an 11% coupon. Bond Dis a 5% coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 6%, and have nine years to maturity. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? For bond D? Explain your answers and the interrelationships among the YTM, coupon rate, and capital gains yield.