On January 1, Year 1, Strang 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 30th and December 31 of each year. Which of the following statements is true?

The bond was issued at a premium and the annual interest rate expense is $40,000

The bond was issued at a discount and the annual interest expense is $40,000

The bond was issued at a discount and each semi-annual cash payment is $20,000

The bond was issued at a premium and each semi-annual cash payment is $25,000