On January 1 of Year 1,Congo Express Airways Issued $3,500,000

question 51

Multiple Choice

On January 1 of Year 1,Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1.The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%.The bond premium or discount is being amortized at a rate of $10,087 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:

• A)$132,500.
• B)$225,000.
• C)$265,174.
• D)$245,000.
• E)$224,826.

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Definitions:

Anchoring

A cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered when making decisions.

Time Inconsistency

The human tendency to systematically misjudge at the present time what will actually end up being desired at a future time.

Precommitments

Strategic decisions or investments made in advance to lock in certain behaviors, goals, or outcomes.

Time Inconsistency

A situation where a decision-maker's preferences change over time, often leading to a conflict between long-term goals and short-term gratification.