Question
On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented
On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented a promise to pay $100 at the maturity date on February 2, 2022, but the investor would receive nothing until then. The value of the coupon showed as $84.73 on the investors screen. This means that the investor was giving up $84.73 on February 2, 2016, in exchange for $100 to be received just less than six years later.
a. | Based upon the $84.73 price, what rate was the yield on the Province of Ontario bond?
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