KOU Enterprises issued $3,000,000, 5%, 20-year bonds on a date when the market rate of interest was 7%. Interest is compounded semi-anually. KOU paid $200,000 in underwriting fees. Determine the annual effective yield on the bond issue (Round to two decimal places):

KOU Enterprises issued $3,000,000, 5%, 20-year bonds on a date when the market rate of interest was 7%. Interest is compounded semi-anually. KOU paid $200,000 in underwriting fees. Determine the annual effective yield on the bond issue (Round to two decimal places):

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5EB: Haiku Inc. issued $600,000 of 10-year bonds with a stated rate of 11% when the market rate was 12%....

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Question

KOU Enterprises issued $3,000,000, 5%,
20-year bonds on a date when the
market rate of interest was 7%. Interest
is compounded semi-anually. KOU paid
$200,000 in
underwriting fees. Determine the annual
effective yield on the bond issue (Round
to two decimal places):
A
C
D
5%
3.89%
7%
7.79%
G

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