On April 1,2017,a company sold $3,500,000 of ten year,6% bonds for $2,222,400. From the proceeds,the company paid $200,000 sales commission.Interest is payable semi-annually on April 1 and October 1.What is the effective rate of interest (round to 2 decimal places)?

Question

Quizplus · Accepted Answer

B) The net proceeds (PV) are $2,022,400 ($2,222,400 - $200,000); N = 20 (10 × 2);
PMT = $105,000 ($3,500,000 × 6% × 6/12)
20 N, 2,022,00 +/- PV, 3,500,000 FV, 105,000 PMT, CPT I/Y I/Y = 6.978% = 6.98%

On April 1,2017,a Company Sold $3,500,000 of Ten Year,6% Bonds