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# Question of the Week - Quantitative Methods

Des Moines, IA, USAPosts: 211 Sr Associate
edited October 2015
A bond is selling for 101. It matures in 3 months and pays a coupon of 2 at maturity (in addition to the face of 100). The effective annual yield is closest to:
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## Question of the Week - Quantitative Methods 23 votes

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• Des Moines, IA, USAPosts: 211 Sr Associate
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For the effective annual yield, you annualize the holding period yield:

HPY = (P1 – P0 + D1) / P0 = (100 – 101 + 2) / 101 = 0.99%

EAY = (1 + HPY)^4 – 1 = 4.02%

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