Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturityLPC issued the bonds: Date Cash interest Effective interest Decrease in balance Outstanding balance
1/1/2021 $207,020
6/30/2021 $7,000 $6,211 $789 206,230
12/31/2021 7,000 6,187 813 205,417
6/30/2022 7,000 6,163 837 204,580
12/31/2022 7,000 6,137 863 203,717
6/30/2023 7,000 6,112 888 202,829
12/31/2023 7,000 6,085 915 201,913
6/30/2024 7,000 6,057 943 200,971
12/31/2024 7,000 6,029 971 200,000

Required:
What is the annual effective interest rate on the bonds?

7%

Explanation:

Calculation to determine the annual effective interest rate on the bonds

Using this formula

Annual Stated interest = Annual cash interest / Face vale of bonds*100

Let plug in the formula

Annual Stated interest =($7000+$7000) / 200000*100

Annual Stated interest=$14,000/20,000

Annual Stated interest=7%

Therefore the annual effective interest rate on the bonds is 7%

the answer is d

explanation:

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.