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the expected answer for part a i s 1 . 9 8 % and for part b 2 . 0 8 % 7 - 3

the expected answer for part ais1.98% and for part b2.08%
7-32
Mike buys a corporate bond with a face value of
A $1000 for $800. The bond matures in 10 years and
pays a coupon interest rate of 5%. Interest is paid
every quarter.
(a) Determine the effective rate of return if Mike
holds the bond to maturity.
(b) What effective interest rate will Mike get if he
keeps the bond for only 5 years and sells it for
$900?
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