BOND PRICING WITH DEFAULT (THINK OF THE STRUCTURE WE DISCUSSED IN CLASS AND TRY TO SOLVE THIS. IT IS NOT TRIVIAL) Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of 1,000, 12 years to maturity, and a coupon rate of 8 percent paid annuallly. If the yield to maturity is 9 percent, what is the current price of the bond? Now the key difference is that every period, the firm may default with a probability of p = 0.02. Assume that in case of default the bond holders do not get anything. In reality, it is not actually this. The yield to maturity is a function of the bond's default risk and should change. But for our question, we will keep the YTM at the same value 9%.