coupon rate is equal to (annual interest/par value) x 100, where the annual interest is $27.55 x 2 = $55.10, or (55.10/1000) x 100 = 5.51 percent.
How does a coupon work?
The amount of money an investor can anticipate earning annually while holding a particular bond is known as the coupon rate.It is determined by dividing the sum of the annual coupon payments by the par value, which is fixed at the time the bond is issued.
Which coupon rate is 5%?
If an investor buys a $1,000 ABC Company coupon bond with a coupon rate of 5%, the issuer pays the investor 5% annually.This indicates that the investor will receive $50 annually, which is the bond's face value calculated by multiplying $1,000 by 0.05.
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