Calculate the value of the new bond

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Reference no: EM131960724

Question: Consider a corporation who recently filed Chapter 11 bankruptcy (reorganization), Under the reorganization, the company has been allowed to reorganize their debt structure with a consolidated new bond issue with more favorable terms. The new issue will be a 30-year, 9% coupon rate bond with semiannual coupons. However, under the new indenture, the company is relieved of making interest payments for the first 10 years. For the remaining 20 years, the regular interest payments would resume. The indenture calls for the deferred interest to be paid in 4 equal installments occurring every 5 years starting with the first installment coming at the end of year 15. Each bond has a $1,000 par value. Calculate the value of the new bond assuming a yield to maturity of 7%. Show your work.

Reference no: EM131960724

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