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Bond CY k gain practice problems

# Bond CY k gain practice problems - UNIVERSITY OF ILLINOIS...

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UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets) Coupon Bonds: Current Yield, Capital Gain and Yield To Maturity Question: Does Current Yield (CY) + Average Capital Gain (Avg. k Gain) = Yield To Maturity (YTM)? Answer: No. Current Yield (CY) + Annual Capital Gain = Yield To Maturity (YTM). Example #1 Coupon Face Coupon YTM Semi-Annual \$1,000.00 \$60.00 4.00% Approximate YTM TTM Price Face - Price Total k Gain % CY % Avg. k Gain CY + Avg. k Gain Annual k Gain % CY + Annual k Gain 10.0 \$1,163.51 9.0 \$1,149.92 8.0 \$1,135.78 7.0 \$1,121.06 6.0 \$1,105.75 5.0 \$1,089.83 4.0 \$1,073.25 3.0 \$1,056.01 2.0 \$1,038.08 1.0 \$1,019.42 0.5 \$1,009.80

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UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets) Coupon Bonds: Current Yield, Capital Gain and Yield To Maturity Question: Does Current Yield (CY) + Average Capital Gain (Avg. k Gain) = Yield To Maturity (YTM)? Answer: No. Current Yield (CY) + Annual Capital Gain = Yield To Maturity (YTM). Example #2 Coupon Face Coupon YTM Semi-Annual \$1,000.00 \$50.00 4.00% Approximate YTM TTM Price Face - Price Total k Gain % CY % Avg. k Gain CY + Avg. k Gain Annual k Gain % CY + Annual k Gain 10.0 \$925.61 9.0 \$931.23 8.0 \$937.19 7.0 \$943.52 6.0 \$950.23
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