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Calculate the effective interest rate associated with loan.

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On 1 January 20X8, a borrower arranged a $1,040,000 three-year 2% bond payable, with interest paid annually each 31 December. There was an upfront fee of $111,197, which was deducted from the cash proceeds of the loan on 1 January 20X8. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:

Quetsion 1-a. Calculate the effective interest rate associated with the loan. (Round your answer to the nearest whole percentage.)

Quetsion 1-b. What net amount is received on 1 January 20X8?

Quetsion 2. Calculate the interest expense reported by the borrower for each year.

(Round your effective interest rate to the nearest whole percentage and your final answers to the nearest whole dollar amount.)

Reference no: EM132475895

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