Answer:
YTM = 13.09 %
Expected current yield = 13.0336%
Expected capital gains yield = 0.062%
Explanation:
given data
future value FV = $1,000
market price PV = 920.70
time period N = 24 years
annual coupon rate = 12 %
solution
we get here first PMT that is
PMT = Future value × coupon rate
PMT = 0.12 × 1000
PMT = 120
we use here excel function to get the rate that is express as
R = Rate(N,PMT,PV,FV) ...................1
so we get here
rate(24,-120,920.70,-1000)
rate = 0.130956
YTM = 13.09 %
and
here Expected current yield will be
Expected current yield = Coupon ÷ Bond price ..............2
Expected current yield = 120 ÷ 920.70
Expected current yield = 13.0336%
and
Expected capital gains yield will be
Expected capital gains yield = YTM - Expected current yield ...............3
Expected capital gains yield = 13.0956 - 13.0336
Expected capital gains yield = 0.062%