The required return of the equity of Snell Computers is 12.5% (as calculated using the CAPM).You also know that Snell's payout ratio is 60%, its sustainable growth rate is 5%, its beta is .85, and its debt/equity ratio is 2.The expected market return is 14%, with a standard deviation of 21%.

You are evaluating an investment in Snell's bonds.You are researching a bond with a price quoted in the Wall Street Journal at 92.5, has a face value of $1000, has 10 years to maturity, and is BB-rated.The yield to maturity of the bond is quoted as the risk-free rate (Treasury rate) plus 550 basis points.

What is the bond's coupon rate?