A $1,000 face value bond is currently quoted at 93.7. The bond pays semiannual payments of $32.50 and matures in 8 years. What is the coupon rate?

a. 3.25 percent

b. 4.89 percent

c. 5.00 percent

D. 6.50 percent

e. 7.56 percent

Answer: The correct answer is 6.50 percent.

Coupon rate = 32.5/1000 = 3.25% x 2 = 6.5%

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