Tony Hawk\'s Adventure (THA) issued callable bonds on January 1, 2012. THA\'s ac
ID: 2388978 • Letter: T
Question
Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2012. THA's accountant has projected the following amortization schedule from issuance until maturity:Date Cash Interest Increase in Carrying
Paid Expense Carrying value value
1/1/12 $194,758
6/30/12 $7,000 $7,790 $790 195,548
12/31/12 7,000 7,822 822 196,370
6/30/13 7,000 7,855 855 197,225
12/31/13 7,000 7,889 889 198,114
6/30/14 7,000 7,925 925 199,039
12/31/14 7,000 7,961 961 200,000
What is the annual stated interest rate on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate.)
a. 3%.
b. 3.5%.
c. 6%.
d. 7%.
Explanation / Answer
($7,000 / $200,000) x 2 = 7% d. 7%.