Answer:
$7,500
Explanation:
Calculation for the amount of interest expense each full year
First step is to calculate the the annual interest
Annual interest =$ 8,000
($100,000*8%)
Second step is to calculate the premium paid
Premium paid=$ 2,500
($ 100,000 * 2.5%)
Third step is to calculate the Amortization of premium
Amortization of premium=$500
( $2,500 / 5years )
Last step is to calculate the interest expenses using this formula
Interest expenses=Annual interest-Amortization of premium
Let plug in the formula
Interest expenses ($8,000 - $500 )
Interest expenses= $ 7,500
Therefore the amount of interest expenses each full year would be $7,500