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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.)

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The effective interest rate is given by


r= \left(1+(i)/(t)\right)^t-1

Given that the 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+(0.067)/(2)\right)^2-1 \\ \\ =(1+0.0335)^2-1 \\ \\ =(1.0335)^2-1=1.0681-1 \\ \\ =0.0681=6.81\%
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