A well-known industrial firm has issued $1000 bonds with a 3% coupon interest rate paid semiannually. The bonds mature 10 years from now. From the financial pages of your newspaper you learn that the bonds may be purchased for $800 each ($795 for the bond plus a $5 sales commission). What nominal and effective annual rate of return would you receive if you purchased the bond now and held it to maturity 10 years from now?

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A: Here,