Whispering Company sells 8 bonds having a maturity value of

Whispering Company sells 8% bonds having a maturity value of $1,600,000 for $1,369,300. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.

Determine the effective-interest rate. (Round answer to 0 decimal places, e.g. 18%.) The effective-interest rate

Solution

Rate =Effective interest Rate Nper 5 PMT 128000 PV 1369300 FV 1600000 Effective interest Rate = =RATE(5,1600000*0.08,-1369300,1600000,0) 12.00% Year Cash Paid Interest Expense Discount Amortized Carrying amount of bonds Jan 1 2017 1369300 Jan 1 2018 128000 164315 36315 1405615 Jan 1 2019 128000 168672 40672 1446287 Jan 1 2020 128000 173553 45553 1491840 Jan 1 2021 128000 179019 51019 1542859 Jan 1 2022 128000 185141 57141 1600000