On June 30, 2009, Sams Office Supplies issued $50,000 face value of 8% bonds at 106. They

Question:

On June 30, 2009, Sam’s Office Supplies issued $50,000 of 8% bonds at 106. They were five-year bonds with interest paid semiannually, on December 31 and June 30.
1. What are the interest payments for the first two years?
2. Was the market interest rate higher or lower than 8% 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...