X2 issued callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 1/1/2018 $114,015 12/31/2018 $13,750 $13,112 $638 113,377 12/31/2019 13,750 13,038 712 112,665 12/31/2020 13,750 12,956 794 111,872 12/31/2021 13,750 12,865 885 110,987 12/31/2022 13,750 12,763 987 110,000 What is the annual stated interest rate on the bonds?

Question

Business

Tori Mcdowell

5 February, 00:17

X2 issued callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 1/1/2018 $114,015 12/31/2018 $13,750 $13,112 $638 113,377 12/31/2019 13,750 13,038 712 112,665 12/31/2020 13,750 12,956 794 111,872 12/31/2021 13,750 12,865 885 110,987 12/31/2022 13,750 12,763 987 110,000 What is the annual stated interest rate on the bonds?

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Answers (1)

Know the Answer?

Selina Watkins · Answer 1

7%

Explanation:

Base on the scenario been described in the question, we can use the following method to solve the given problem

The annual stated interest rate on the bonds is gotten by

$7,000/$100,000

= 7%. As our answer.