Stanley Hart invested in a municipal bond that promised an annual yield of 6.7 percent. The bond pays coupons twice a year. What is the effective annual yield (EAY) on this investment? (Round percentage to two decimal places.)

Question

Quizplus · Accepted Answer

To find the effective annual yield, we need to use the following formula:
EAY = (1 + (coupon rate/n))^n - 1
where n is the number of coupon payments per year. In this case, n = 2, so we have:
EAY = (1 + (0.067/2))^2 - 1
EAY = 0.0681 or 6.81%
Therefore, the answer is B.

Stanley Hart Invested in a Municipal Bond That Promised an Annual