Answer:
BEY (r) = 5%
No of times coupon is paid in a year (m) = 2
EAY = (1 + r/m)m - 1
EAY = (1 + 0.05/2)2 - 1
EAY = (1 + 0.025)2 - 1
EAY = 0.05063 = 5.063%
The correct answer is D
Explanation:
EAY of a semi-annual coupon equals 1 plus annual yield divided by 2 raised to power 2. There is need to divide the annual coupon rate by 2 since coupon is paid twice in a year on semi-annual coupon bond.
