Answer:
The Coupon rate is 11.66%
Explanation:
Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity.
Face value = F = $1,000
Selling price = P = $1,382.01
Number of payment = n = 14 years
Bond Yield = 7.5%
The coupon rate can be calculated using following formula
Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]
7.5% = [ C + ( $1,000 - 1,382.01 ) / 14 ] / [ ( $1,000 + $1,382.01 ) / 2 ]
7.5% = [ C - $27.29 ] / $1,191
7.5% x $1,191 = C - $27.29
$89.33 = C - $27.29
C = $89.33 + $27.29 = $116.62
Coupon rate = $116.62 / $1,000 = 0.11662 = 11.66%
