You are considering a 10-year, $1000 par value bond. Its coupon rate is 9%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 8.16%, then how much should you be willing to pay for the bond?© BrainMass Inc. brainmass.com March 4, 2021, 8:15 pm ad1c9bdddf
Formula for converting effective rate to nominal rate is (1+i/n)^n - 1
where i = nominal rate and n = no. of times compounded in a yr.
Using the formula (convert the 8.16% effective rate to a nominal rate) ...
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