Baby doll Inc., issued bonds at face value at a yield to maturity of 8 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 14 percent. What has happened to the price of the bond?

b. Suppose that investors believe that Baby doll can make good on the promised coupon payments, but that the company will go bankrupt when the bond matures and the principal

comes due. The expectation is that investors will receive only 80 percent of face value at

maturity. If they buy the bond today, what yield to maturity do they expect to receive?