An analyst is comparing a semi-annual paying bond with an annual paying bond, both having a Yield to Maturity (YTM) of 8%. What is the effective annual yield (EAY) of the semi-annual bond, and which one offers a better actual return to the investor?

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Economics · Bond Valuation

An analyst is comparing a semi-annual paying bond with an annual paying bond, both having a Yield to Maturity (YTM) of 8%. What is the effective annual yield (EAY) of the semi-annual bond, and which one offers a better actual return to the investor?

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8.16% and the semi-annual bond is better.

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Answer 1

16.00% and the semi-annual bond is better.

Answer 2

7.84% and the annual bond is better.

Answer 3

8.16% and the semi-annual bond is better.

Answer 4

8.00% and both are identical.

An analyst is comparing a semi-annual paying bond with an annual paying bond, both having a Yield to Maturity (YTM) of 8%. What is the effective annual yield (EAY) of the semi-annual bond, and which one offers a better actual return to the investor?

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An analyst is comparing a semi-annual paying bond with an annual paying bond, both having a Yield to Maturity (YTM) of 8%. What is the effective annual yield (EAY) of the semi-annual bond, and which one offers a better actual return to the investor?

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