Part 1: Analyze the 10-year, 8% coupon rate (semi annual payment), $1000 par value bond. The bond currently sells for $1318. What’s the bond’s current yield, and capital gain yield?
A. 6.07%, 0.71%
B. 6.07%, -0.71%
C. 6.07%, 1.97%
D. 6.07%, -1.97%
Part 2: Analyze the 10-year, 8% coupon rate (semi-annual payment), $1000 par value bond. The bond currently sells for $1318. What’s the bond’s yield to maturity?
A. 5.36%
B. 4.10%
C. 2.05%
D. 6.15%
Part 3: If you earned a rate of return of 8% on your bond investments last year. During that time the inflation rate was 2.68%. What is your real rate of return?
A. 5.18%
B. 4.17%
C. 3.68%
D. 6.20%