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20. (5 points) Tara buys two bonds. One is a 3-year 0-coupon bond that has a maturity value of 1,000 and a 4% annual effective
20. (5 points) Tara buys two bonds. One is a 3-year 0-coupon bond that has a maturity value of 1,000 and a 4% annual effective yield. The second bond has a 1,000 par value, pays semi-annual coupons at a 6% annual rate, and will mature in bonds have the same purchase price. Calculate the annual (not semi-annual) effective yield of the bond with coupons. years. The two A. 4.2% B. 6.4% C. 8.4% D. 8.6% E. 8.9%
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