On July 1, 2016, $8 Million Face Amount of 6

question 42

Essay

On July 1, 2016, $8 million face amount of 6%, 10-year bonds were issued. The bonds pay interest on an annual basis on June 30 each year. The market interest rates were slightly lower than 6% when the bonds were sold.Required:
(a.) How much interest will be paid annually on these bonds?
(b.) Were the bonds issued at a premium or discount? Explain.(c.) Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? Explain your answer.

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