Pharoah, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 11.0 percent (semiannual payments). Mana
1 answer:
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Answer:
option (B) 7.94%
Explanation:
Given:
Principal for Note A = $128,000
Timer period for note A = 5/31/2021 to 12/31/2021 = 7 months = years
Principal for Note B = $215,000
Timer period for note B = 7/1/2021 to 12/31/2021 = 6 months = years
Interest rate for Note B = 9%
Therefore,
Total interest for Note B = Principal × Interest rate × Time period
= $215,000 × 0.09 ×
= $9,675
Thus interest on Note A = Total interest - Interest on Note B
= $15,600 - $9,675
= $5,925
Also,
Total interest for Note A = Principal × Interest rate × Time period
$5,925 = $128,000 × Interest rate ×
Interest rate = 0.07935 ≈ 0.0794
or
= 0.0794 × 100% = 7.94%
Hence,
The answer is option (B) 7.94%