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Mike buys a corporate bond with a face value of 1000 for

Question: Mike buys a corporate bond with a face value of $1000 for $900. The bond matures in 10 years and A 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?

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Finance Basics: Mike buys a corporate bond with a face value of 1000 for

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