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Ipatiy [6.2K]
3 years ago
14

Moonlight Company sells $ 300 comma 000 of 9​%, 15​-year bonds for 67.0453 on April​ 1, 2018. The market rate of interest

on that day is 14.5​%. Interest is paid each year on April 1. The issue price of the bond is $ 201 comma 136. Moonlight Company uses the​ straight-line amortization method. The amount of interest expense for each year will be
Business
1 answer:
Lubov Fominskaja [6]3 years ago
3 0

Answer:

Interest expense for the year: 33,590.33

Explanation:

face value $ 300,000

rate 9%

time 15 years

issued at   $  201, 136

discount:  $    98, 864

amortization per year under straight-line: the discount is equally distributed for each period

98,864 / 15 = 6,590.33

<u><em>interest expense per year:</em></u>

face value x rate + amortization:

300,000 x 0.09 + 6,590.33 = <em>33,590.33</em>

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Hence, the correct answer would be:

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Hope this help!!

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