On January 1, 2021 we purchase $450,000 of Kappa Inc.s bonds. The bonds pay interest annually on Dec. 31 each year. The bonds carry a stated interest rate of 4.9% and were issued when the market rate was 4.6%. The bonds mature on June 30, 2035. Management has determined that the investment will be classified as trading. On December 31, 2021 the fair market value of the bonds was $468,000. On December 31, 2022 the market value was $459,000.

• Make the necessary journal entries for 2021 and 2022.
• Calculate the market rate of interest as of December 31, 2022.