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A company issues a bond with a nominal value of 1,000 M Euros on January 1, year 1, with a discount (issue price =

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A company issues a bond with a nominal value of 1,000 M Euros on January 1, year 1, with a discount (issue price = 900 M Euros). The coupon is 4 % and payable annually at the end of the year, the effective interest rate is 8%, duration of the bond is 5 years, reimbursement at the end of year 5. This impacts the financial statements of year 2 as follows Cash decreases by 40 M Euros, financial liabilities increase to 966.56 M Euros, interest expense of 74.56 M Euros Cash decreases by 80 M Euros, financial liabilities remain at 1,000 M Euros, interest expense of 80 M Euros Cash decreases by 40 M Euros, financial liabilities increase to 1,066.56 M Euros, interest expense of 74.56 M Euros Cash decreases by 40 M Euros, financial liabilities increase to 980 M Euros, interest expense of 80 M Euros

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