Question

uppose an investor earned a semiannual yield of 6.4 percent on a bond paying coupons twice a year. What is the effective annual yield (EAY) on this investment

Answer 1

Effective annual yield is 0.132

Step-by-step explanation:

The computation of the effective annual yield (EAY) is shown below:

Effective annual yield is

= (1 + periodic interest rate)^m – 1

= (1 + 0.064)^2 - 1

= 0.132

hence, the effective annual yield (EAY) is 0.132

And, the same is to be considered

We simply applied the above formula so that the correct answer could come