Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2016. LPC\'s accoun

Question

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2016. LPC's accountant has projected the following amortization schedule from issuance until maturity: Effective Outstanding Cash interest Decrease in balance Date interest balance S207,020 206,230 205,417 204,580 203,717 202,829 201,913 200,971 200,000 1/1/2016 $789 813 837 863 6/30/2016 $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 S6,211 6,187 6,163 6,137 6,112 6,085 6,057 6,029 12/31/2016 6/30/2017 12/31/2017 6/30/2018 915 943 971 12/31/2018 6/30/2019 1231/2019 What is the annual stated interest rate on the bonds? 6% 35% None of the answer choices is correct. 7%

Explanation / Answer

Ans : 6%,

Balance on 1/1/2016 :$207,020

Interest at the end of 6 months = $6,211

Interest Rate = $6211/$207,020*100

Interest rate for 6 months = 3%

If we multiply wiith 2 we will get annual interest =6%

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