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Calculate the Effective Annual Rate of the Bill

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Reference no: EM133056939

Question - Read the example and answer the questions below.

Mainstream Investment Corporation issued a seven (7) year 3% coupon bond that has a face value of $1,000 and a yield to maturity of 6%:

a) Show the time-linefor the payments under this bond if the coupons are paid monthly.

b) What is the expected price of this bond today?

c) Northam Investments is buying a 180-day bank bill todayThe bill matures in 180 days' time. The bill has a face value of $150 000 and the current market yield on this bill is 1.75% pa. What is the price that Northam Investments will have to pay to buy the bill today?

d) Calculate the Effective Annual Rate (EAR) of the Bill?

Reference no: EM133056939

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