Financial difficulty and has asked its bondholders

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AB bonds carry a 10% annual coupon, have a $1,000 face value and mature in 4 years. Bonds of equivalent risk yield 15%. Find the market value of AB bonds.

AB is in financial difficulty and has asked its bondholders to accept the following deal. The firm would like to make the next two payments of half the scheduled amount, and make the last two payments of twice the scheduled amount. If this plan is implemented, what will be the new price of the bond?

Reference no: EM131058491

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