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nataly862011 [7]
3 years ago
11

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization sch

edule from issuance until maturityLPC issued the bonds:
Date Cash interest Effective interest Decrease in balance Outstanding balance
1/1/2021 $207,020
6/30/2021 $7,000 $6,211 $789 206,230
12/31/2021 7,000 6,187 813 205,417
6/30/2022 7,000 6,163 837 204,580
12/31/2022 7,000 6,137 863 203,717
6/30/2023 7,000 6,112 888 202,829
12/31/2023 7,000 6,085 915 201,913
6/30/2024 7,000 6,057 943 200,971
12/31/2024 7,000 6,029 971 200,000

Required:
What is the annual effective interest rate on the bonds?
Business
1 answer:
Zielflug [23.3K]3 years ago
4 0

Answer:

7%

Explanation:

Calculation to determine the annual effective interest rate on the bonds

Using this formula

Annual Stated interest = Annual cash interest / Face vale of bonds*100

Let plug in the formula

Annual Stated interest =($7000+$7000) / 200000*100

Annual Stated interest=$14,000/20,000

Annual Stated interest=7%

Therefore the annual effective interest rate on the bonds is 7%

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Swifty Corporation financed the purchase of a machine by making payments of $20500 at the end of each of five years. The appropr
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Answer:

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Explanation:

The cost of machine to Swifty Corporation the present value pf the ordinary annuity payment of $20,500 per year discounted at the interest rate of 12%.

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North Bank is analyzing Belle Corp.'s financial statements for a possible extension of credit. Belle's quick ratio is significan
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Answer:

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