The company sold $100,000, five-year, 10% bonds on January 1, 2022, for $98,000. This resulted...
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The company sold $100,000, five-year, 10% bonds on January 1, 2022, for $98,000. This resulted in a $2,000 bond discount ($100,000 - $98,000). This discount results in an effective-interest rate of approximately 10.5348%.
Question: How did we arrive at a 10.5348% effective-interest rate?
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