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What is the effective annual rate

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Q1. Royal International Bank (RIB) charges an interest rate of 1.25% per month on loans to its customers. Like all lenders, RIB must report an annual percentage rate (APR) to customers. What should the bank report? What is the effective annual rate (EAR)?

Q2. Ittihad Corporation has just issued 30-year bonds at a coupon rate of 6.9%. The bonds make semi-annual payments. If the YTM (i.e., yield to maturity) on these bonds is 5.2%, what is the current bond price?

Q3. Al-Diwan corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.1%, and a current price of $1,038. The bonds make semi-annual payments. What must the coupon rate be on these bonds?

Reference no: EM133123093

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