Suppose an Investor Earned a Semiannual Yield of 6

question 32

Multiple Choice

Suppose an investor earned a semiannual yield of 6.4 percent on a bond paying coupons twice a year. What is the effective annual yield (EAY) on this investment? (Round to two decimal places.)

• A) 12.80%
• B) 6.40%
• C) 6.50%
• D) 13.21%.

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Definitions:

Market Outcome

The equilibrium result of market forces of supply and demand determining the price and quantity of goods and services exchanged.

Implicit Costs

Input costs that do not require an outlay of money by the firm

Outlay

The amount of money spent on a particular item or service, serving as expenses in financial transactions or projects.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing between options.