What is the difference between the annual yield to maturity


1. A zero-coupon bond matures in seven years and sells for $800. What is the difference between the annual yield to maturity (with annual payments) and effective annual rate (with semi-annual payments)?

A. 3.239%

B. 2.119%

C. 1.632%

D. 1.607%

E. 0.026%

F. 0.000%

2. A 10% coupon bond matures in twenty years and sells for $500. Which of the following will be the highest?

A. The annual yield to maturity if there are semi-annual payments

B. The annual yield to maturity if there are annual payments

C. The effective annual rate if there are semi-annual payments

D. The effective annual rate if there are annual payments

E. “A” and “D” will be the highest.

F. “B” and “C” will be the highest

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