ABC Corporation’s recently issued bonds paying interest semiannually and maturing in 10 years. The face value of each bond is $1000, and 8% is the nominal interest rate. (a) What is the effective interest rate an investor receives if $1000 is paid for the bond? (b) If a 1.75% fee is deducted by the brokerage firm from the initial $1000, what is the effective annual interest rate paid by ABC Corporation?
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