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Answer :
Final answer:
By calculating the total annual payments ($57.50) and dividing by the bond's face value ($1000), we are able to determine that the coupon rate of the bond is 5.75%.
Explanation:
The coupon rate of a bond pertains to the interest the issuer owes to the bondholder. With the values given, since payments are made semi-annually, a year's total payments would amount to $28.75 x 2 = $57.50. To compute the coupon rate, we divide the annual payments ($57.50) by the bond's face value ($1000), which in this case results in 0.0575 or 5.75%. Thus, the bond's coupon rate is 5.75%.
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