What is the interest expense formula for Senior Notes?

The interest expense for Senior Notes is calculated by multiplying the interest rate by the average balance of the notes outstanding over a specific period. This approach accurately reflects the amount of interest that accrues based on the principal amount of the Senior Notes and the specified interest rate.

By using the average balance, the calculation captures the variations in the outstanding principal due to any repayments made throughout the period, which is essential for understanding the true cost of borrowing. This method ensures that the interest expense reflects the effective cost of the debt based on how much of it is actually outstanding during that time frame.

In contrast, other options do not correctly represent how interest expense is calculated. For instance, simply multiplying the interest rate by net cash flow does not account for the actual outstanding balance of the debt. Adding mandatory and optional repayment amounts or combining principal and interest repayments also does not isolate the interest expense calculation, which is fundamentally about the cost incurred from borrowing, represented solely by the interest due based on the debt outstanding.