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Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash
Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity:
Date | Cash interest | Effective interest | Decrease in balance | Outstanding balance | ||||||||
1/1/2018 | $ | 207,020 | ||||||||||
6/30/2018 | $ | 7,000 | $ | 6,211 | $ | 789 | 206,230 | |||||
12/31/2018 | 7,000 | 6,187 | 813 | 205,417 | ||||||||
6/30/2019 | 7,000 | 6,163 | 837 | 204,580 | ||||||||
12/31/2019 | 7,000 | 6,137 | 863 | 203,717 | ||||||||
6/30/2020 | 7,000 | 6,112 | 888 | 202,829 | ||||||||
12/31/2020 | 7,000 | 6,085 | 915 | 201,913 | ||||||||
6/30/2021 | 7,000 | 6,057 | 943 | 200,971 | ||||||||
12/31/2021 | 7,000 | 6,029 | 971 | 200,000 | ||||||||
What is the annual stated interest rate on the bonds?
Multiple Choice
6%
None of the answer choices is correct.
3.5%
7%
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