Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value
01/01/2021 $ 8,640,967
06/30/2021 $ 300,000 $ 345,639 $ 45,639 8,686,606
12/31/2021 300,000 347,464 47,464 8,734,070
06/30/2022 300,000 349,363 49,363 8,783,433
12/31/2022 300,000 351,337 51,337 8,834,770
What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)
A) 3%.
B) 4%.
C) 6%.
D) 8%.
Answer: C
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.