A firm issues a 3 year annual paying bond with a face value of $100 and a fixed coupon rate of 10% for $98 at the beginning of year 1. The effective interest rate on this bond is imputed as the internal rate of return that equates the amount raised to the present value of the promised fixed payments.
a. Compute the effective interest rate on this bond.
b. Give the accounting entries for this bond over the bond's lifetime.
c. Provide an amortization table over the bond's lifetime.