Effective Yield of a bond A: Ther that equates the bond price with the present value of the bond Present value of the bond is 100 100 100 100 100 PV= (1+R)(1+R)(1+R)(1+ R Letting bond price equal to the Pv, 100 1000 R →R=100/1000=10Effective Yield of a Bond • A: The R that equates the bond price with the present value of the bond. • Present value of the bond is • Letting bond price equal to the PV, •  R=100/1000=10% 100 1000 R = 234 100 100 100 100 100 ... (1 ) (1 ) (1 ) (1 ) PV R R R R R = + + + + = + + + +