At the beginning of his current tax year, Eric bought a corporate bond with a maturity value of $50,000 from the secondary market for $45,000. The bond has a stated annual interest rate of 5 percent payable on June 30 and December 31, and it matures in five years on December .Absent any special tax elections, how much interest income will Eric report from the bond this year and in the year the bond matures?

correct answer: Accrued market discount on bonds is reported as interest income when the bonds are sold or mature. Therefore, Eric will only report the interest he actually receives $2,500 or [($50,000 0.025) 2]. In the year the bond matures, he will again report $2,500 of interest income related to the semiannual interest payments received and an additional $5,000 of interest income related to the market discount on the bonds. I have 2 incorrect solutions: June 30 : 50,000*0.05=5000 December 31: 50,000*0.05=5000 The year =5000+5000=10000 or June 30 : 50,000*0.05=2500 December 31: (50,000+2500)*0.05=2625 The year =2500+2625=5125 My questions: 1.Why is my solutions incorrect 2.In correct solution, how can I get 0.025 (from[($50,000 0.025) 2])