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Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date

Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash interest Effective Decrease in Outstanding interest balance balance 1/1/2024 $ 207,020 6/30/2024 $ 7,000 $ 6,211 $ 789 206,230 12/31/2024 7,000 6,187 813 205,417 6/30/2025 7,000 6,163 837 204,580 12/31/2025 7,000 6,137 863 203,717 6/30/2026 7,000 6,112 888 202,829 12/31/2026 7,000 6,085 915 201,913 6/30/2027 7,000 6,057 943 200,971 12/31/2027 7,000 6,029 971 200,000 What is the annual effective interest rate on the bonds? 3.5% 6% 7% 3%

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