Question

DeKay Dental Supplies issued $10,000 of bonds on January 1, 2021. The bonds pay interest semiannually. This is a partial bond amortization schedule for the bonds. (Round your answer to nearest whole dollar amount.) Payment Cash Effective interest Decrease in balance Outstanding balance 9,080 1 400 409 9 9,089 2 400 409 9 9,098 3 400 409 9 9,107 4 400 410 10 9,117 What is the stated annual rate of interest on the bonds

Answer 1

8%

Step-by-step explanation:

Data provided in the given question

Cash = 400

The computation of annual rate of interest is shown below:-

Semi annual coupon rate

= 400 ÷ 10,000

= 4%

So, Annual rate of interest

= 4% × 2

= 8%

Therefore, as per the question for calculating the annual rate of interest we simply multiply semi annual coupon rate with semi annual interest.