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You want to figure out how much money you will make by investing in bonds

#### You want to figure out how much money you will make by investing in bonds

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You want to figure out how much money you will make by investing in bonds. In your portfolio, you have a premium bond from Pi Corporation that pays annual coupons at 8.7%. You also own a discount bond from Delta Inc. that pays 4.7% coupons annually.

Both bonds have twelve years to maturity and a par value of $1,000.

The market (YTM) for both bonds is 6.7%.

**a) What is the current yield for Bond Pi? For Bond Delta?**

**(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.)**

**b) **If interest rates remain unchanged, what is the __expected capital gains yield__ over the next year for Bond Pi? For Bond Delta?

(**Hint**: you will need to solve the price of each bond next year to find the capital gains yield. Each bond will have a maturity of 1 less year next year)

**(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)**