Question: 1. On December 31, 2010, a company issues 16%, 10-year bonds with a par value of $100,000. Interest is paid on June 30 and December 31. The bonds are sold to yield a 14% annual market rate at an issue price of $110,592. Are these bonds issued at a discount or a premium? Explain your answer.
2. A company enters into an agreement to make four annual year-end payments of $1,000 each, starting one year from now. The annual interest rate is 8%. The present value of these four payments is
(a) $2,923
(b) $2,940, or
(c) $3,312.