Adams Ltd is contemplating issuing ten-year $30,000 face value debentures, which, under present conditions, would yield an effective annual interest rate of 6%. The debentures would pay interest semi-annually at an annual interest rate of 4%.

1) Discuss how much cash Adams Ltd should receive on the date of issue, showing your calculations.

2) Is the annualized cost to Adams Ltd greater than, less than, or equal to the contract rate of 4%? Explain why.

Your answer should not exceed 50 words. Calculations can be in addition to these 50 words.

1) How much cash should Adams Ltd receive on the date of issue:

2) Is the annualized cost to Adams Ltd greater than, less than, or equal to the contract rate of 4%? Explain why.