Business, 17.04.2021 15:50 meramera50

A firm issued an 8% coupon bond (semiannual coupon payment) 20 years ago. The bond now has 10 years left until its maturity date, but the firm is having financial difficulty. Investors believe that the firm will be able to make interest rate payments only for the first eight years. Starting in year nine, the firm will not be able to pay any coupon. In total, the firm will miss four coupon payments. Also, investors believe that the firm will be forced into bankruptcy eventually and bondholders will receive only 75% of par value. a. If the required interest rate is 11%, what is the present value of the coupon payments that the firm is able to pay? What is the present value of the par that the firm is able to pay?
b. What should the bond be selling at?
c. What is the stated yield-to-maturity (YTM) of the bond?

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A firm issued an 8% coupon bond (semiannual coupon payment) 20 years ago. The bond now has 10 years...

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