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Vadim26 [7]
3 years ago
10

Stanley hart invested in a municipal bond that promised an annual yield of 6.7 percent. the bond pays coupons twice a year. what

is the effective annual yield (eay) on this investment? (round percentage to two decimal places.)
Business
1 answer:
shtirl [24]3 years ago
3 0
The effective interest rate is given by

r= \left(1+\frac{i}{t}\right)^t-1

Given that the <span>bond yeilds an annual yield of 6.7 percent and pays coupons twice a year.

The effective interest rate is given by:

r= \left(1+\frac{0.067}{2}\right)^2-1  \\  \\ =(1+0.0335)^2-1 \\  \\ =(1.0335)^2-1=1.0681-1 \\  \\ =0.0681=6.81\%</span>
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