Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually (4.25% each 6 months),and those bonds sell at their $1,000 par value.The firm's Class Ann bonds have the same risk,maturity,nominal interest rate,and par value,but these bonds pay interest annually.Neither bond is callable.At what price should the annual payment bond sell?

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These two bonds should provide the same EFF%.Therefore,we can find the EFF% for the semiannual bond and then use it as the YTM for the annual payment bond.At the calculated price,the two bonds will have YTMs with the same EFF%.Note too that the semiannual payment bond must have a higher price than the annual bond because then it receives the same cash flow,but faster.Therefore,the annual bond must sell at a price below the $1,000 par value at which the semiannual bond sells. 11ea856c_8bd3_8a13_9aec_5fdc447eb197_TB1222_00 ?

Kebt Corporation's Class Semi Bonds Have a 12-Year Maturity and an 8.50