00:02
Hello, let's start with the first part a.
00:05
Here we need to calculate the what is the bonds yield to maturity and this will be equal to the coupon and coupon we can calculate this.
00:33
Here we have the rate of coupon which is 10 % and 10 % of 1 ,000 is 100.
00:54
So we can find this coupon, it's 100.
01:04
Then we add to this coupon the sum of phase value.
01:13
Face value is 1000 minus the current price price is given it's 1 ,000 and we divide this by the number of years and we divide this by the number of years and we have two years so we divide this by two two okay and we divide this by again the sum of face value which is the 1 ,000 again, we know.
02:23
And now we find the average of these two prices, of two numbers, the face value, which is 1 ,000 and the current price.
02:36
We divide this by 2 we find simply the average amount and now we can calculate yield to maturity and actually it will be in percent so let me calculate let me multiply this by 100 and now we can find that yield to maturity would be equal to i'll give me a second please it will be equal to 15 i don't know how many decimal places so let me round to 2 decimal places 15 .17 percent so this is the first answer yield to maturity and now we have part b now we calculate this the expected rate of capital gain or loss and also expected rate of return if the bond holder sells the stock and the price will be even lower it will be 10 it will be 1 ,000 okay so let's start with expected rate of capital gain or maybe loss it seems like it will be lost because the current price is 1 ,144 and the new price will be 1000 we subtract 144.
04:59
We subtract 1 ,0 .84 .89 and we divide this by this year price.
05:12
And of course we need to multiply this by 1000 because our answer will be in a percent...