Calculate the effective annual yield on bond

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a. Suppose an ordinary bond has a coupon rate of 10 percent, the yield to maturity is quoted at 12 percent. This is semiannual coupon, the bond matures in ten years. Calculate the bond's price. Calculate the effective annual yield on this bond.

b. A taxable bond has a yield of 9%, and a municipal bond has a yield of 6.5%. If you are in a 30% tax bracket, explain which bond you will prefer. At what tax rate would you be indifferent between these two bonds?

Reference no: EM133116408

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