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Business, 05.04.2021 23:50 kadariusmerchan

Bill buys a 10-year 1,000 par value bond with semi-annual coupons paid at an annual rate of 6%. The price assumes a nominal yield of 6%, compounded semi-annually. As Bill receives each coupon payment, he immediately puts the money into an account earning interest at an annual effective rate of i. At the end of 10 years, immediately after Bill receives the final coupon payment and the redemption value of the bond, Bill has earned an annual effective yield of 7% on his investment in the bond. Calculate i.

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