Eaton Company Issued $5 Million of Bonds

Multiple Choice

Eaton Company issued $5 million of bonds. The stated rate of interest was 10% and the market rate was 11%. Which of the following statements is correct?

A) The bonds were issued at a premium.
B) Annual interest expense will exceed the company's actual cash payments for interest.
C) Annual interest expense will be $500,000.
D) The book value of the bond will decrease as the bond matures.