The coupon rate of the bond is 7.49%
The amount of annual interest income provided to a bondholder based on the bond's face value is known as the coupon rate. Governmental and non-governmental organizations both issue bonds to raise funds for operating costs. When a person purchases a bond, the bond issuer makes a pledge to the bondholder to make monthly payments based on the bond's principal amount at the coupon rate specified in the issued certificate.
Using excel PMT function
Where
NPER = Year to maturity = 12 Years
PV = Price of bond = $984
FV = face value = $1000
Rate = bond's yield = $7.7
The formula for calculating the coupon rate is as follows:
P = (PV*R) / [1 - (1 + R)^(-n)]
We subsitute the values of in the excel function where:
=PMT(0.077, 12, -984, 1000, 0)
We get the annual coupon payment of $749
Dividing the coupon payment by 1000 and multiplying by 100 to get the coupon rate of 7.49%
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