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What was the effective interest rate on the bonds

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Question - Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on July 1, 2020 at 104 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond premium is amortized semiannually on a straight-line basis. On April 1, 2021, $1,200,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion.

What was the effective interest rate on the bonds when they were issued?

a. 9%

b. Above 9%

c. Below 9%

d. Cannot determine from the information given.

Reference no: EM132609981

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