solution

Pelzer Printing Inc. has bonds outstanding with 9 years left to maturity. The bonds have an 8% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond’s market price has fallen to $908.30. The capital gains yield last year was -9.17%.

1. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.

   %

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2. For the coming year, what are the expected current and capital gains yields? Do not round intermediate calculations. Round your answers to two decimal places.

   Expected current yield: %

   Expected capital gains yield: %