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.

Format your answer by copying and pasting the following bold face into the answer box provided; however, please do not use bold face in your answer itself.

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.