FIN 650 Mini case Sam Strother and Shawna Tibbs/TUTORIALOUTLET DOT C FIN 650 Mini case Sam Strother and Shawna Tibbs/T | Page 2

then change N to see what happens to the PV as the bond approaches
maturity.)
f. (1) What is the yield to maturity on a 10-year, 9% annual coupon,
$1,000 par value bond that sells for $887.00? That sells for
$1,134.20? What does the fact that a bond sells at a discount or at a
premium tell you about the relation ship between rd and the bond’s
coupon rate?
(2) What are the total return, the current yield, and the capital gains
yield for the discount bond? (Assume the bond is held to maturity and
the company does not default on the bond.)
weights? Why?