On March 15, 2018, Candoit Inc. sold $10,000,000 of five-year, 3% bonds for $9,972,469. From the proceeds, Candoit paid its investment bank a $200,000 sales commission. Interest is payable semi-annually on March 15 and September 15. On March 16, 2022, Candoit buys back $2,000,000 of bonds on the open market for their face value.

Required:
a. What are the nominal and effective rates of interest that Candoit is paying on the bonds expressed as an annual percentage rate?
b. Assuming that Candoit records the bond liability at amortized cost, what is the net book value of the bonds outstanding on March 16, 2020? On September 16, 2020? Use your financial calculator to determine these amounts and then verify them by constructing a schedule of interest expense and bond amortization during the life of the bond. For this part, ignore the redemption of bonds on March 16, 2022.
c. On the date of the open market purchase, had market interest rates increased or decreased since the bonds were issued? Explain.
d. Did the repurchase result in an economic gain or loss for either Candoit or the investor? Explain.