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Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually.
Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually. Interest is paid semi-annually. A portion of the spreadsheet appears as follows:
| A | B | C | D | E | |
| 1 | Stated rate: | 0.045 | |||
| 2 | Effective rate: | 0.05 | |||
| 3 | Face amount: | 500,000 | |||
| 4 | Term to maturity in years: | 20 | |||
| 5 | |||||
| 6 | Period | Cash Payment | Interest Expense | Change in Discount | Outstanding Balance |
| 7 | 0 | ||||
| 8 | 1 | ||||
| 9 | 2 |
What formula should Ohlson use in cell C8 to calculate interest expense for the first interest payment?
Multiple Choice
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=B8 D8
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=E7*B3
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=E7*B3/2
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=E7*C2/2
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