A 10-year bond of a firm in severe financial distress has a coupon rate of 14% and

Question:

A 10-year bond of a firm in severe financial distress has a rate of 14% and sells for $900. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. What is the stated and expected yield to of the bonds? The bond makes its payments annually.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...