The carrying value of a $500,000,4 year note with an 8 percent face rate (paid semiannually)that was issued to yield a 7 percent market rate is $515,286.36.What is the interest expense for the next interest period?

Question

Quizplus · Accepted Answer

The interest expense for the next interest period can be calculated by multiplying the carrying value of the note by half of the face rate:

Interest expense = Carrying value * (Face rate/2)
Interest expense = $515,286.36 * (8%/2) = $20,611.45

Therefore, the best choice is B.

The Carrying Value of a $500,000,4 Year Note with an 8