Bryant Inc.just issued $1,000 par 30-year bonds.The bonds sold for $1,107.20 and pay interest semiannually.Investors require a rate of 7.75% on the bonds.What is the bonds' coupon rate?

Question

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The bond's coupon rate can be calculated using the formula for the present value of a bond. Given that the bond sells for $1,107.20, has a par value of $1,000, a required rate of 7.75% (3.875% semiannually), and pays interest semiannually, the coupon rate is calculated to be approximately 8.675%.