generic inc. issued bonds in 1988 that will mature 16 years from the date of issue. the bond pays a 14.375 percent coupon and the interest is paid semiannually. its current price is $1,508.72. what is the effective annual yield on the bonds? (round your answer to two decimal places.)

What is annual yield?
The total of all interest, dividends, or even other income that an investment generates divided by the age of a investment or the period during which the investor has held it gives the average yield on to an investment or portfolio. The yield, or total income from an investment, is specifically the income generated divided by the number of decades held. When investing in floating-rate securities, where the fund's balance and/or interest rate are subject to frequent change, the average annual yield is indeed a particularly helpful tool. The average annual yield can also be used to compare a variety of other investments, including stocks, commodities, real estate, and deposit accounts.

A Face Value (FV) $1000

B Coupon rate 14.375%

C Number of compounding 2

periods per year

[tex]A \times B \div C[/tex] Interest per period (PMT) $71.88

Bond price $1508.72

D Numbers of years of maturity 16

[tex]D \times C[/tex] Number of compounding 32

periods till maturity (NPER)

Effective annual yield

[1+RATE(NPER,PMT,PV,FV)]^2-1

Effective annual yield 8.86%

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