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7.37 A plan for remodeling the downtown area of the city of Steubenville, Ohio, required the city to issue $5 million worth of gen- eral
7.37 A plan for remodeling the downtown area of the city of Steubenville, Ohio, required the city to issue $5 million worth of gen- eral obligation bonds for infrastructure re- placement. The bond interest rate was set at 6% per year, payable quarterly, with the principal repayment date 30 years into the future. The brokerage fees for the transac- tions amounted to $100,000. If the city re- ceived $4.6 million (before paying the brokerage fees) from the bond issue, (a) what interest rate (per quarter) did the investors require to purchase the bonds and (b) what are the nominal and effective rates of return per year to the investors
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