In 2007, Horwitz Corporation Issued Ten-Year, 9 Percent Bonds When

question 153

Multiple Choice

In 2007, Horwitz Corporation issued ten-year, 9 percent bonds when the market interest rate was 11 percent. Interest is payable annually. During 2010, the market rate of interest for similar bonds was 12 percent. Using the effective interest method of amortization, what interest rate will be used to calculate interest expense for 2010?

• A) 12 percent
• B) 9 percent
• C) 6 percent
• D) 11 percent

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Definitions:

Warehouse

A storage facility for housing goods in large quantities, typically before they are distributed for sale.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as net profit divided by the cost of the investment.

Margin

The difference between the selling price of a product and the cost of the product, representing profitability.

Sales

The total revenue earned from the sale of goods or services related to a company's primary operations.