Exams are over!

I'm so glad. Some were easy, some were hard. Accounting was the hardest, I really hope I pass that. There was one tough question I wanted to share with everyone. My friends and I all found this question the hardest and we think it didn't make sense. Maybe you can help? Here it is:
Mainwaring Ltd made a private placement of $10million of eight-year debentures. The coupon interest rate is 8 percent, paid semi-annually. The investor's required rate of return for these debentures is 10 percent.

The issue was made on 1 April 2007. The company's balance date is 31 March.

The company uses the effective interest rate method to allocate any discount or premium which may arise on the issue of its debentures

PVIFA(n=16, i=5%) = 10.83777

PVIF(n=16, i=5%) = 0.45811

Show the journal entry to record the issue of the debentures on 1 April 2007.

This was easy enough (I hope..): dr cash 12m

                                       cr bond premium 2m

                                       cr 8% bonds          10m

Calculate the i)debenture interest expense disclosed in the Income statement for the year ending 31 March 2008.

                      ii)cash outflow for interest in the year ending 31 March 2008.

This was where the trouble started. Does anyone know how to do this? I was stumped...

This was off topic a bit, but from tomorrow I'll start posting more frequently, and it will be related to the CFA. Goodnight.

163 days until the level 1 exam.