A bond with a coupon rate of 532 percent and semiannual coup

A bond with a coupon rate of 5.32 percent and semiannual coupon payments matures in 16 years. The YTM is 6.49 percent. What is the effective annual yleld? 0 6.49% 5.32% 5.39% o 686% 6.60%

Solution

Effective annual yield = [1+i/n]^n - 1

              = [1+ .0649/2]^2   -1

             = [1+ .03245]^2   -1

             = [1.03245]^2 - 1

               = 1.0660-1

               = .0660 or 6.60%

correct option is \"\"E\"