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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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