1. A zero-coupon bond matures in seven years and sells for $800. What is the difference between the annual yield to maturity (with annual payments) and effective annual rate (with semi-annual payments)?
A. 3.239%
B. 2.119%
C. 1.632%
D. 1.607%
E. 0.026%
F. 0.000%
2. A 10% coupon bond matures in twenty years and sells for $500. Which of the following will be the highest?
A. The annual yield to maturity if there are semi-annual payments
B. The annual yield to maturity if there are annual payments
C. The effective annual rate if there are semi-annual payments
D. The effective annual rate if there are annual payments
E. “A” and “D” will be the highest.
F. “B” and “C” will be the highest