Question

On January 1, your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%. The market interest rate is 5%. The issue price of the bond was $10,866. Using the effective-interest method of amortization and rounding to the nearest dollar, the interest expense for the first year ended December 31 would be:

A) $700.

B) $543.

C) $667.

D) $759.

Answer

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