ABC Corporation is issuing some zero coupon bonds, which pay no interest. At maturity in 20 years they pay a face value of $1000. The bonds are expected to sell for $311.80 when issued.

a What is the effective interest rate investor receives?

b A 1% fee (based on the face value) is deduted by the brokerage firm from the initial revenue. What is the effective annual interest rate paid by ABC Corporation.