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At the start of the year, Axon, Inc. issued bonds for $38,800. The bonds had a face value of $40,000. If the coupon (stated) rate
At the start of the year, Axon, Inc. issued bonds for $38,800. The bonds had a face value of $40,000. If the coupon (stated) rate of interest was 4% and the effective (market) rate of interest was 5%, how would Axon calculate the interest expense for the first year using the effective interest method?
| a. | $38,800 x 4% | |
| b. | 40,000-38,800 | |
| c. | $40,000 x 5% | |
| d. | $40,000 x 4% | |
| e. | $38,800 x 5% |
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