1. On January 1, Year 1, McTavish Incorporated issued bonds with a face value of $500,000, a stated rate of interest of 8%, and a 5-year term to maturity. The effective rate of interest was 10%. Interest is payable in cash on June 30 and December 31 of each year. Which of the following statements is true?
   1. This bond was issued at a premium, and each semiannual cash payment is $25,000.
   2. This bond was issued at a discount, and each semiannual cash payment is $20,000.
   3. This bond was issued at a discount, and the annual interest expense is $40,000.
   4. This bond was issued at a premium, and the annual interest expense is $40,000.