6 10 Big Bubba Issued A Bond With A 10 Year Maturity A 1 000 Par Value A 10 Percent 1429539

6-10. big bubba issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate, and semiannual interest payments. Two years after the bond was issued, the going rate of interest on similar-risk bonds fell to 6 percent. Suppose the market rate stays at this level for the remainder of the bond’s life. Compute the (a) current yield and (b) capital gains yield that the bond will generate in the third year (Year 3) of its life. 6-22. Many years ago, John butter bean issued a zero coupon bond with a $1,000 face value. The bond matures in three years. If the current market rate on similar bonds is 11 percent, (a) what is the bond’s current value? Suppose the market rate stays at 11 percent for the next three years. What (b) current yield and (c) capital gains yield will bondholders receive each year during the remainder of the bond’s life?

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