The Arcadia Company issued \($50\) million of five-year bonds on January 2. The bonds carried an annual coupon rate of six percent, with interest paid semiannually, and were issued at a time when similar riskrated securities were yielding eight percent. Within twelve months of the debt issuance, however, market yield rates had risen to ten percent.

Required

a. Calculate the proceeds from the five-year debt offering on January 2.

b. Calculate the interest expense for the Arcadia Company on June 30 and on December 31.

c. Calculate the market value of the five-year bonds on December 31.

d. If the Arcadia Company elects to retire the bonds on December 31, how much gain (loss) would the company recognize?

e. Is the decision to retire the bonds on December 31 a good decision?