40. You buy a 12% annual coupon bond with $1,000 face value and 4 years to maturity. The bond pays coupons semiannually. If you pay $1,100 for this bond, what is the bonds effective annual yield!

41. Assume that you are in the 20% marginal tax bracket, and corporate bonds yield 4%p.a. Municipal bonds of the same risk would have to provide what yield. in order to make you indifferent between these two investments? Assume and write down any other parameters you need to answer this question.

42. Although commercial banks still play a large role in the economy, their relative importance has been declining. Why?