The financial report of Montefiore Medical Center, which operates a major New York City hospital, included the following item in a summary of long-term debt out-standing (dates changed):


An explanatory note indicated the following:
The proceeds from the 8.625 percent revenue bonds, dated November 1, 1999, issued by the Dormitory Authority of the State of New York, were used by the Medical Center to construct a parking garage. The fair value of these bonds was estimated to be approximately $5.1 million and $ 5.4 million on December 31, 2013, and December 31, 2012, respectively, using a discounted cash flow analysis based on the Medical Center€™s incremental borrowing rates for similar types of borrowing arrangements. The bonds are payable serially through June 30, 2030, at increasing annual amounts ranging from $130,000 in 2014 to $500,000 in 2030. Bonds may be redeemed before maturity, for which call premiums are 0.5 percent through June 30, 2014, after which call premiums cease. Under the terms of the revenue bond agreement, certain escrow funds are required to be maintained. On December 31, 2013, escrow assets aggregated approximately $1.2 million, which exceeded minimum escrow requirements.
1. Why would the fair value of the bonds, as calculated by the center, be so much greater than their face value?
2. The note states that the €˜€˜bonds are payable serially.€™€™ What does that mean?
3. Assuming that prevailing interest rates remain constant, why would the market price of the bonds be greater before June 30, 2014, than after?
4. Is it likely that the fair value of the bonds is as great as the fair value calculated by the center?Explain.

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(in thousands) December 31 2013 2012 Revenue honds payable $4,178 S4,303