On January 1, 2020, Caliber Corporation issued 9% bonds dated January 1, 2020, with a face amount of $10 million. The bonds mature in 2029 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid annually on December 31.

1. What is the amount of the annual interest payment?

2. What is the price of the bond on the issue date? (state method used)

3. Was the bond sold at a discount or a premium? Explain why.

4. What is the "actual" cost of this debt?

5. What is the price of the bond if the market yield is 8%? (state method used)

6. Is this bond sold at a discount or premium? Explain why.

7. What is the "actual" cost of this debt?