Financial accounting

A plan for remodeling the downtown area of the city of Steubenville, Ohio, required the city to issue $5 million worth of general obligation bonds for infrastructure replacement. The bond interest rate was set at 6% per year, payable quarterly, with the principal repayment date 30 years into the future. The brokerage fees for the transactions amounted to $100,000.

If the city received $4.6 million (before paying the brokerage fees) from the bond issue,

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(a) what interest rate (per quarter) did the investors require to purchase the bonds and

(b) what are the nominal and effective rates of return per year to the investors?

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