Question: Par value = 1000 Time to maturity = 20 years Coupon rate = 10% p.a. Current Price = 850 YTM = 12% Given the bond

Par value = 1000

Time to maturity = 20 years

Coupon rate = 10% p.a.

Current Price = 850

YTM = 12%

Given the bond described above, if interest were paid semi-annually (rather than annually), and the bond continued to be priced at $850, what would be the resulting effective annual yield to maturity?

Also what is effective annual yield to maturity and how do we calculate it?

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