Adam Ship Builders issued $5 million of its 7% bonds on February 8, 2010, at 96. The

Question:

Adam Ship Builders issued $5 million of its 7% bonds on February 8, 2010, at 96. The bonds mature on June 30, 2020. Interest is payable semiannually on June 30 and December 31.

Requirements
1. What were the proceeds from the bond issue?
2. Was the market interest rate at the time of issue higher or lower than 7%?
3. Will interest expense each period be higher or lower than the interest payment?
4. What will the book value of the bonds be at maturity?