Stanley Hart invested in a state government bond that promised an annual yield of 6.7 percent....

Stanley Hart invested in a state government bond that promised an annual yield of 6.7 percent. The bond pays coupons twice a year. What is the effective annual yield on this investment?

	a.	6.81%
	b.	3.35%
	c.	9.4%
	d.	8.5%.
	e.	6.70%

Expert Solution

Effective Annual Rate = (1 + r/2)² - 1

Effective Annual Rate = (1 + 0.067/2)² - 1

Effective Annual Rate = 6.81%

jeff jeffy answered 3 years ago

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