A trustee of a split-interest trust has to allocate income to the income beneficiary and principal to the remainderman. The trustee recently used $20 million of the trust's assets to purchase a zero-coupon bond in a very safe company. The effective annual yield on this bond is 8%. Zero-Coupon bonds are purchased at a deep discount and provide the full face value to an investor in cash on the maturity date of the bond.

A. How should the annual appreciation in the maturity value of this bond be accounted for?

B. How much cash income will this bond generate for the income beneficiary in the first year of ownership?

C. Has the trustee breached a fiduciary duty?