Kevin Company acquired as an investment $250,000 of 7% bonds, dated January 1, 2020 and maturing on December 31, 2022. The bonds were acquired in order to profit from price changes (hint: then what kind of investment is this?). The company will receive interest annually, every December 31 through December 31, 2022. As a result of changing market conditions, the bond price was 107 1/2 on December 31, 2020 and 104 on December 31, 2021. Below, please find an amortization table for Kevin Company's investment.

DateCashInt. Rev.Prem. Amort.Carry Value

01/01/20270,814.08

12/31/2017,500.0010,832.566,667.44264,146.64

12/31/2117,500.0010,565.876,934.13257,212.51

12/31/2217,500.0010,287.497,212.51250,000.00

1. What effective interest rate is earned by Kevin Company on this investment?

2. Give the required journal entry to mark the investment to market on December 31, 2020. For full credit, please show all work, including the tables you are creating to derive your answer. All tables used in your work must follow the format I taught you in class for marking-to-market problems.

3. Give the required journal entry to mark the investment to market on December 31, 2021. For full credit, please show all work, including the tables you are creating to derive your answer. All tables used in your work must follow the format I taught you in class for marking-to-market problems.

This is the entire problem.