The state of Michigan issues zero coupon bonds as part of its Michigan College Savings Bonds series. This bond series had different maturity dates and the different maturities led to very different prices. Suppose that in late 2012, the state issued 9,000 such bonds with a total $54 million maturity value. Each bond had a maturity value of $6,000, and bonds ranged in price from $5,500 for a 2-year bond to $946 for an 12-year bond. Consider one of the 12-year zero coupon bonds issued on December 31,2012, for$946. Assume that the interest rate is compounded semiannually.

1. Compute the market interest rates for the 12-year zero coupon bond.

2. Is this higher or lower than the rate on the 2-year bonds? You can answer this question by asking what the price of the 2-year bond would be at exactly the 12-year rate and comparing that number with the actual sales price. 3. Prepare the state's journal entry for one 12-year bond at issuance. Do not use a discount account. 4. Prepare the state's journal entry for recording interest expense on the 12-year bonds for the first 6 months of 2013. Round to the nearest dollar. 5. Compute the liability that Michigan would show on its balance sheet for this bond on June 30, 2013