Answer:
10%
Explanation:
Cash paid as semiannual coupon payment is $250,000
semiannual annual interest rate=semiannual coupon payment/face value of the bond.
The face value of the bond is $5,000,000
stated semiannual rate of interest=$250,000/$5,000,000=5%
Stated annual rate of interest =semiannual rate of interest *2
stated annual rate of interest=5%*2=10%
The coupon rate quoted on Tomkin Library Systems is 10% per year
yield to maturity =$220,000/$5,500,000*2=8%
Since the coupon rate is higher than the yield ,the bond was issued at a premium of $500,000 above its face value of $5 million
