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The market price of a bond is $900 for a 10-year bond that pays interest semi-annually...

The market price of a bond is $900 for a 10-year bond that pays interest semi-annually at a coupon rate of 6% per annum. What is the bond’s expected return, stated on an annual basis compounded semi-annually? What is the bond’s expected return, stated on an annual basis compounded annually?  Show steps on how to solve using excel and the formulas used as well as manually how to solve it

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Answer #1

Bond’s expected return, stated on an annual basis compounded semi-annually is calculated in excel and screen shot provided below:

Bond’s expected return, stated on an annual basis compounded semi-annually is 7.435%.

Bond’s expected return, stated on an annual basis compounded annually is calculated in excel and screen shot provided below:

Bond’s expected return, stated on an annual basis compounded annually is 7.45%.

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