1)
Coupon = (0.077 * 1000) / 2 = 38.5
Number of periods = 4 * 2 = 8
Yield to maturity = 10.4%
Keys to use in a financial calculator:
2nd I/Y 2
FV 1000
PV -914.89
PMT 38.5
N 8
CPT I/Y
2)
Effective annual yield = (1 + YTM/n)n - 1
Effective annual yield = (1 + 0.104/2)2 - 1
Effective annual yield = (1.052)2 - 1
Effective annual yield = 1.107 - 1
Effective annual yield = 0.107 or 10.7%
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