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ANTONII [103]
3 years ago
14

The market price of a semi-annual pay bond is $987.58. It has 14.00 years to maturity and a coupon rate of 7.00%. Par value is $

1,000. What is the effective annual yield?
Business
1 answer:
Volgvan3 years ago
8 0

Answer:

7.12%

Explanation:

ffective annual yield = (1+i/m)m - 1

i = coupon rate = 7%

m = compounding frequency = 2

Effective annual yield = (1+0.07/2)^2 - 1

Effective annual yield = (1+0.035)^2 - 1

Effective annual yield = (1.035)^2 - 1

Effective annual yield = 1.071225 - 1

Effective annual yield = 0.071225

Effective annual yield = 7.12%

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