Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 66

Explain how a bondholder can estimate the effective interest rate return on the total cost of the investment, including commissions. (See Example.)
Finding the Cost to Buy Bonds
Assume that the sales charge is $1 per bond, and find the following for Morgan Stanley (MS) bonds maturing in 2042.
(a) The total cost of purchasing 20 bonds
(b) The total annual interest paid on these bonds
(c) The effective interest rate to the buyer including the cost of buying the bonds
SOLUTION