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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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