Reference no: EM132617642

On 1 January 20x1, Company DEF issued bonds with the following features:-

Face value of the bond is $200,000.

Period to maturity is 10 years.

Coupon rate is 8% per year.

Effective interest rate at the date of bond issuance is 10%.

The bonds pay interest annually on 31 December.

Problem 1: The bond's interest expense for the year ended 20x3 is closest to

Option 1: $16,000.

Option 2: $17,866.

Option 3: $18,473.

Option 4: $19,535.

Option 5: None of the above.

Problem 2: The bond carrying value at 31 December 20x3 is closest to

Option 1: $175,422.

Option 2: $178,660.

Option 3: $200,000.

Option 4: $180,526

Option 5: None of the above.