Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1. Instructions Set up a schedule of interest expense and discount amortization under the effective-interest method. (Hint: The effective-interest rate must be computed.)

How do you get the effective rate? I know it is 12%. Can someone please explain it.