Sheffield Corp. received a seven-year zero-interest-bearing note on February 22, 2017, in exchange for property it sold to Pharoah Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for a note of this type was 6.1% on February 22, 2017, 6.6% on December 31, 2017, 6.8% on February 22, 2018, and 7.1% on December 31, 2018. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2017 and 2018, respectively?

a. 6.1% and 7.8%

b. 6.6% and 7.1%

c. 0% and 0%

d. 6.1% and 6.1%

Answer rating: 100% (QA)

Zero coupon bonds does not carry any interest during the tenure of the bonds Bu... View the full answer