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**Question 21** A bond trader owns a bond that pays 7% compounded quarterly. She is comparing this to a bond that pays 6.90%, compounded monthly. What is the monthly compounding equivalent rate for the trader's quarterly compounding bond? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

R_{\text{monthly}} = \left[1 + \frac{0.07}{4}\right]^{4/12} - 1 \times 12 = 6.96\%

(Book 4, Module 56.1, LO 56.a)

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Question 21

A bond trader owns a bond that pays 7% compounded quarterly. She is comparing this to a bond that pays 6.90%, compounded monthly. What is the monthly compounding equivalent rate for the trader's quarterly compounding bond?

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Financial Risk Manager Part 1

Get started today

Comments (0)

Get started today

Question 21 A bond trader owns a bond that pays 7% compounded quarterly. She is comparing this to a bond that pays 6.90%, compounded monthly. What is the monthly compounding equivalent rate for the trader's quarterly compounding bond?

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Question 21

A bond trader owns a bond that pays 7% compounded quarterly. She is comparing this to a bond that pays 6.90%, compounded monthly. What is the monthly compounding equivalent rate for the trader's quarterly compounding bond?