A 2-year $100 par value bond pays 10% monthly coupons is sold atpar. Determine its...

A 2-year $100 par value bond pays 10% monthly coupons is sold at par. Determine its effective annual rate

Expert Solution

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N = 2 (The Bond is for 2 Years)

PV = -100 (The present value of the bond is $100 as it is sold at par)

PMT => 10% of 100 = 10 ( The coupon 10% is on Face Value)

FV = 100 (The Face value of bond is $100)

CPT + I/Y = 10

As the bond is sold at par, so its effective annual rate is equal to its coupon rate, that is 10%

jeff jeffy answered 2 years ago

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