Payment Cash Payment Increase in Balance 1 2 3 4 5 6 225,000 225,000 225,000 225,000 225,000 225,000 Effective Interest 240,622 241, 247 241,896 242,572 243, 275 244,006 15,622 16,247 16,896 17,572 18,275 19,006 Outstanding Balance 6,015,542 6,031, 164 6,047,411 6,064,307 6,081, 879 6, 100, 154 6, 119, 160 38 39 40 225,000 225,000 225,000 291,675 294,342 297,115 66,675 69,342 72,115 7,358,543 7,427,885 7,500,000 Required: 1. What is the face amount of the bonds? 2. What is the initial selling price of the bonds? 3. What is the term to maturity in years? 4. Interest is determined by what approach? 5. What is the stated annual interest rate? 6. What is the effective annual interest rate? 7. What is the total cash interest paid over the term to maturity? 8. What is the total effective interest expense recorded over the term to maturity? 1. 2. 3. years 4. Face amount Initial selling price Term to maturity Interest is determined by what approach? Annual interest rate Effective annual interest rate Total cash interest paid Effective interest expense 5. % % 6. 7. 8