Marigold Corp. issued $5840000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2021, $1220000 of these bonds were converted into 600 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? Below 8% Above 8% 8% Cannot determine from the information given.
Marigold Corp. issued $5840000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2021, $1220000 of these bonds were converted into 600 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? Below 8% Above 8% 8% Cannot determine from the information given.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Marigold Corp. issued $5840000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2021, $1220000 of these bonds were converted into 600 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?
Below 8%
Above 8%
8%
Cannot determine from the information given.
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