On December 31, 2012, Advanced Defense Contractors issued $25,000 face value of 10% bonds at 95. They

Question:

On December 31, 2012, Advanced Defense Contractors issued $25,000 of 10% bonds at 95. They were five-year bonds with interest paid semiannually, on June 30 and December 31.
1. What are the interest payments for the first two years?
2. Was the market interest rate higher or lower than 10% at the date of issue?
3. Will the interest expense be higher or lower than the interest payment?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...