Does anybody know how to calculate the capital gains yield of a bond?

8/23/2006 11:37:48 PM

nope no one here does

perhaps reviewing your notes might help

8/24/2006 7:02:38 AM

do you have a specific problem you need to calculate out?
here's an example of how to find the capital gains yield of a bond:

Given:
bond's value was $1169.36
current market rate was 6%
bond matures in 12 years

Suppose you buy the bond for $1169.36 and sell it one year later when the current market rate is still 6%.

One year later, the bond's value is $1159.37 to find that, enter the following in your financial calculator:
22, N (11 years left to maturity)
40, PMT
1000, FV
6, I/YR
PV = 1159.37

Capital Gains Yield: [$1159.37 - $1169.36] / $1169.36 = -$9.99 / $1169.36 = -.0084 = -.84%

hope this helps

8/24/2006 1:55:22 PM

Thanks for the help. I understand everything you did there except for when you used 40 for the payments. How did you determine the coupon rate was 8%? Or is that implied somewhere?

8/28/2006 10:34:56 PM

sorry, i thought you just needed that one part.. i guess i should have stated the whole problem from beginning to end..

You own a $1000 par value bond with a coupon rate of 8%. The bond matures in 12 years and the market interest rate is 6%.

First, calculate the current value of the bond, this way:

END
2, P/Yr
1000, FV
40, PMT [1000 x 8% = 80, 80/2 = 40]
6, I/Yr
24, N [12 x 2 = 24]
PV = $1169.36

Then go ahead and do the calculations in my previous post, this should give you CGY

8/28/2006 11:14:55 PM

anyone have sloan? do we need a book

8/29/2006 1:53:30 PM

i had sloan a couple semesters ago and we only used the book to work on homework problems (that we never had to turn in).. it was just for extra practice.. i used it b/c the homework problems were the same kind as the exam questions, but some people just went by his handouts..

8/29/2006 5:13:17 PM

you can easily get by without the book

8/29/2006 7:33:51 PM