On January 1, 2013, Medley Corporation sold $100,000 of its 14%, five-year bonds dated January 1, 2013, for $103,000 total cash. The bonds sold at

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The bonds were sold for $103,000, which is greater than their face value of $100,000. This means that they were sold at a premium, and the premium amount is $3,000 ($103,000 - $100,000). Since the bonds have a stated interest rate of 14%, but were sold for more than face value, the effective interest rate (including the premium) will be less than 14%. If the bonds had been sold at face value, the effective interest rate would have been 14%. If they had been sold at a discount, the effective interest rate would have been greater than 14%.

On January 1, 2013, Medley Corporation Sold $100,000 of Its