Problem:
A $5,000 face value industrial bond can be purchased for $4,920. Its interest rate is 8% and it pays interest semiannually and will mature in eight years.
Required:
Question 1: What is the effective rate of return on the bond?
Question 2: What is the effective rate of return that the purchaser can expect to receive if the bond is purchased?
Note: Please describe comprehensively and provide step by step solution.