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What is interpolated effective interest rate of investment

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On January 1, 2021, ABC Co. acquired a P1,000,000 face value Investment in Bond Securities with a term of three years and annual interest payable every December 31 at 10% at an acquisition price of 95. ABC Co. incurred paid transaction costs amounting to P1,963. ABC Co. acquired the bond securities with the intention of collection contractual cash flows from the principal and interest and of selling the bonds to obtain gain or loss on changes in fair value. On December 31, 2021 and December 31, 2022, the quoted prices of bonds are 102 and 99, respectively.

Problem 1: What is the interpolated effective interest rate of the Investment in Bond Securities?

a. 12%
b. 11%
c. 9%
d. 8%

Reference no: EM132772404

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