Determine the effective rate of return

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Reference no: EM131806390

Mike buys a corporate bond with a face value of $1000 for $900. The bond matures in 10 years and pays a coupon interest rate of 6%. 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 $950?

Reference no: EM131806390

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