$(1)$ Assume for this problem that beginning E&P is

$$100,$ rather than $$94.$ X issues and distributes two negotiable notes payable by M to A and Y $($each note having a face amount and "stated principal amount" and "stated redemption price at maturity" of $$120$ and FMV of $$100).$ What would result now, during the terms of the notes, and upon collection? First, ignore OID, market discount, and the time$-$value$-$of$-$money rules generally.