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Bill Buys a 15-year 1000 par value 8% bond with semi-annual coupons. The price assumes a nominal yield of 8% convertible semi-annually. As Bill receives
Bill Buys a 15-year 1000 par value 8% bond with semi-annual coupons. The price assumes a nominal yield of 8% convertible semi-annually. As Bill receives each coupon payment, he immediately puts the money into a savings account earning interest at an annual effective rate of i. At the end of 15 years, immediately after Bill receives the final coupon payment and the redemption payment, Bill has earned an annual effective yield of 7% on his overall investment.
Calculate i.
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