00:01
Hello students, we are given a question here.
00:03
A bond has a per value of $10 ,000 and it currently has a price of $9 ,500.
00:11
The bond pays a rate of 5 % over the 5 years.
00:15
Then we need to calculate the current yield and the same bond started the year with the price of $9 ,500 and is expected to be sold for $9 ,750.
00:27
Dollar okay what is the then what we are asked what is the capital gains yield so first of all we are supposed to know that here what we are given per bond value is given as per bond value okay it is given as a ten thousand dollar and current price so basically current price is a given as equivalent to obviously $9 ,500 in the annual cooper payment annual coupon payment okay students annual coupon payment should be equivalent to obviously five percentage okay students and the annual so basically we can find it so basically five percentage of of what of obviously per one value which is given as ten thousand dollar so we will get it as a 500 dollar now here we are supposed to know that what we need to do we need to calculate the capital sorry current yield so basically the current yield should be equivalent to it should be equal to annual coupon payment annual coupon payment students then divided by obviously divided by the current price okay students so now annual coupon payment which is nothing but equivalent to obviously we have recently calculated five hundred dollar and divided by what is the current price current price is given as ninety five hundred dollar okay so here obviously two zeros will be cancelled by two zeros five divided by 95 is one divided by 19 okay students so basically how we will calculate it see one divided by 19 it becomes equivalent to 0 .0 5263 okay students and when we go for the percentage we can even change it in the percentage we will get it as 5 .26 percentage okay now we will go for the second part which is like a capital gain yield capital gain yield so it is nothing but equal and to obviously 9 ,750 minus 9 ,500, okay, and divided by 9 ,500 because it is nothing but equal to the 90, nothing but equal to the, what we are given here, that the same bond started that with the year with the price of 9500 and is expected to be sold for 9 ,750.
03:28
So it should be like final minus initial divided by final value, okay? so it goes something like this.
03:35
So we will get it as 250 divided by 9500.
03:39
Now, 1 .0 will be cancer at by 1 .0.
03:43
And when we can solve it divided by 5, we will get 5 divided by 19...