Question: There are 2 bonds. The first bond is a 5-year bond with annual coupons that sells at a price equal to its par value (a

There are 2 bonds. The first bond is a 5-year bond with annual coupons that sells at a price equal to its par value (a par bond). The second bond is a $1,000 bond with 8% annual coupons matures in 2 years at $1,100 and a yield rate of 9% effective annually. The ratio of the Macaulay duration of the first bond to the convexity of the second bond is 0.5. Find the annual effective yield rate for the first bond.

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