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The groom proposed at the couple's home in England on Monday, December 20, and gave his bride-to-be a solitaire diamond engagement ring on a platinum band with pavé diamonds on a split shank.
In a statement, Zara Philips said she was, "really shocked when Mike proposed but I am very happy."
A spokesman for the Palace said that Queen Elizabeth II and Prince Philip are "delighted with the news" of their eldest granddaughter's engagement.
Zara Philips' older brother, Peter Philips, wed Autumn Kelly at St. George's Chapel at Windsor Castle in 2008. Both Zara and Peter are low-profile members of the royal family and neither hold royal titles. Their mother turned down the Queen's offer to give her children royal honors.
A wedding date has not been set, but one can assume that it will not be on or around April 29, when Prince William and Kate Middleton will wed at Westminster Abbey.
Similar to Prince William and Kate Middleton's wedding once the couple's engagement was announced, bookies began taking bets on the wedding date and wedding venue. The early favorite is August 2010 at St. George's Chapel at Windsor Castle, where the bride's brother, Peter, married Autumn Kelly two years ago.
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