**Please answer question #2, Question #1 is included for information purposes.**

1. During 2018, the market rates changes dramatically. Now Spahr Cosmetics bonds are sold for $1,204. What is yield to maturity assuming that the bond has 12 years to maturity, a par value of $1,000, and a coupon rate of 5%? The bond pays coupon interest semiannually.

1. 4.59%
2. 6.46%
3. 2.97%
4. 2.59%

2. What is the effective annual yield on the bond in question #6?

1. 2.61%
2. 2.99%
3. 4.63%
4. 6.50%