Answer:
7.92% annually
Explanation:
Bond price is the sum of present value of coupon payment and face value of the bond. If the price is available the coupon payment can be calculated by following formula
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
$10,500 = C x [ ( 1 - ( 1 + 7%/2 )^-7x2 ) / 7%/2 ] + [ $10,000 / ( 1 + 7%/2 )^7x2 ]
$10,500 = C x 10.92 + $6,177.82
$10,500 - $6,177.82 = C x 10.92
$4,322.18 = C x10.92
C = $43,22.18 / 10.92
C = $395.8
Coupon rate = 395.80 / $10,000 = 3..96% semiannually = 3.96% x 2 = 7.92% annually
