Prembond Corp. issues £1,000,000 face value of fi ve-year bonds, dated 1 January 2010,when the market interest rate is 4 percent. Th e sales proceeds are £1,044,518. Th e bondspay 5 percent interest annually on 31 December.1 . What is the interest payment on the bonds each year?2 . What amount of interest expense on the bonds would be reported in 2010 and 2011using the eff ective interest rate method?3 . Determine the reported value of the bonds (i.e., the carrying amount) at 31 December2010 and 2011, assuming the eff ective interest rate method is used to amortise thepremium.

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