A company issued 100 5year bonds with a par value of 240000

A company issued 10.0%, 5-year bonds with a par value of $240,000. The market rate when the bonds were issued was 11.0%. The company received $230,954.85 cash for the bonds. Using the effective interest method, the amount of interest expense for the second semiannual interest period is:

Solution

Using the effective interest method, the amount of interest expense for the second semiannual interest period is:1270.25

Explanation:

$230954.85 x .011 x ½ years = $1270.25