A company buys a 100 par value bond with 5% annual coupons. The company pays...
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Accounting
A company buys a 100 par value bond with 5% annual coupons. The company pays a price that will give it a yield rate of 4% effective if the bond matures at par at the end of 7 years. The company receives all coupons when due. However, at the end of 7 years, the company receives a maturity value of only 90, due to the bankruptcy of the issuer of the bond. The company's effective annual yield rate over the 7- year period is i. Determine i.
Pls. Show formula used
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