On November 1,2017,FastCare sold $5,000,000 of three-year bonds for $4,750,325. From the proceeds,the company paid accounting fees of 50,000.Interest of 5% is payable annually.What is the effective rate of interest (round to 2 decimal places)?

Question

Quizplus · Accepted Answer

A) The net proceeds (PV) are $4,700,325 ($4,750,325 - $50,000); N = 3 (3 × 1); PMT = $250,000
3 N, 4,700,325 +/- PV, 5000000 FV, 250000 PMT, CPT I/Y I/Y = 7.296% = 7.30

On November 1,2017,FastCare Sold $5,000,000 of Three-Year Bonds for $4,750,325