Among the long-term liabilities of Wal-Mart Stores, the world’s largest discount company is a bond due in 2040 that carries a face interest rate of 4.87 percent. In 2010, this bond sold on the New York Stock Exchange at 108.
Did this bond sell at a discount or a premium? Assuming the bond was originally issued at face value, did interest rates rise or decline after the date of issue? Would you have expected the market rate of interest on this bond to be more or less than 4.875 percent?
Did the current market price affect either the amount that the company paid in semiannual interest or the amount of interest expense for the same period? Explain your answers.