The carrying value of a $500,000,4 year note with an 8 percent face rate (paid semiannually)that was issued to yield 9 percent is $491,031.19.What is the interest expense for the next interest period?

Question

Quizplus · Accepted Answer

The interest expense is calculated using the carrying value of the note and the yield rate. The carrying value is $491,031.19, and the yield rate is 9% annually, or 4.5% semiannually. Therefore, the interest expense for the next period is $491,031.19 * 4.5% = $22,096.40.

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