Town Bank has $200,000 of 10% debenture bonds outstanding. The bonds were issued at 104 in 2018 and mature in 2038. The bonds have annual interest payments.

Requirement 1. How much cash did Federal Bank receive when it issued thesebonds?

Requirement 2. How much cash in total will Federal Bank pay the bondholders through the maturity date of thebonds?

Requirement 3. Calculate the difference between your answers to requirements 1 and 2. This difference represents Federal Bank's total interest expense over the life of the bonds.

Requirement 4. Compute Federal Bank's annual interest expense using thestraight-line amortization method. Multiply this amount by 20. Your20-year total should be the same as your answer to requirement 3.

Multiply the annual interest expense by 20.

Is your20-year total the same as your answer to requirement3?