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Discount-Mart issued ten thousand $1,000 bonds on January 1, 2021. The bonds have a 10-year term...

Discount-Mart issued ten thousand $1,000 bonds on January 1, 2021. The bonds have a 10-year term and pay interest semiannuall

Discount-Mart issued ten thousand $1,000 bonds on January 1, 2021. The bonds have a 10-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. Effective Decrease in Outstanding Payment Cash Interest Balance Balance 8,640,967 1 300,000 345,639 45,639 8,686,606 2 300,000 347,464 47,464 8,734,070 3 300,000 349,363 49,363 8,783,433 4 300,000 What is the effective annual rate of interest on the bonds? 6%. 8%. 3%. 4%.
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ReportAnswer #1

Effective annual rate = Interest expense/Selling price of bonds

= 345639/8640967

Effective Semiannual rate = 4%

Annual rate = 4*2 = 8%

So answer is b) 8%

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