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Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity: What is the annual effective interest rate on the bonds

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Tundexi

Answer:

6%

Explanation:

See complete question as attached below as picture

Semi-annual effective interest rate on the bonds = Effective interest / Outstanding balance

= $6,211/$207,020

= 0.030002

= 3%

Annual effective interest rate on the bonds = 2 * 3%

Annual effective interest rate on the bonds = 6%

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