X2 issued callable bonds on January 1, 2012. The bonds pay interest annually on

Question

X2 issued callable bonds on January 1, 2012. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Decrease in Carry Value Carry Value 1/1/10= Carrying Value 104,212 12/31/11 Cash 7,000 Interest Paid 6253 Decrease in Carrying Value 747 Carrying Value 103,465 12/31/12 7,000 6208 792 102,673 1231/13 7,000 6160 840 101,833 12/31/14 7,000 6110 890 100,943 12/31/15 7,000 6057 943 100,000 What is the annual market interest rate on bonds A 3% B 3.5% C. 6% D 7% v

Explanation / Answer

3%

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