Answer: 12%
Explanation:
A coupon payment on a bond is simply the annual interest payment which the bondholder will get from the bond's issue date till the bond matures. It should be noted that coupons are described in their coupon rate, and this is calculated when one adds the sum of the coupons that are paid per year and then divide it by the face value to f the bond.
Im this case, we are told that Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, and selling for $1,382.01 and that at this price, the bonds yield 7.5 percent.
Using Excel, the coupon payment will be $120. The coupon rate will now be:
= Coupon payment/Face value
= 120/1000
= 0.12
= 12%
Therefore, the coupon rate is 12%
