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Victoria bond is a premium bond with 8% coupon Houston bond is a 4 % coupon bond currently selling at a discount Both bonds make annual payments and have a yield to maturity YTM of 6% and have

Victoria bond is a premium bond with 8% coupon. Houston bond is a 4 % coupon bond currently selling at a discount. Both bonds make annual payments and have a yield to maturity (YTM) of 6%, and have 5 years till maturity. a. Estimate their prices (Bond prices). b. Estimate their current yields c. If interest rates remain unchanged by next year, estimate their prices a year from now. d. Estimate their first year capital gain yields. Hint: CGY = (P1-P0)/P0
 

May 15 2020 View more View Less

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