Environ Systems is a firm that specializes in cleaning environmental damage (waste disposal) and specialty chemicals. As part of its expansionary plans, it has made a large issuance of 10-year corporate bonds, with a face value of $1000 each and an annual coupon rate of 12%.

(a) Assuming a discount rate of 7%, calculate the value of the bond.

(b) Environ got into deep financial troubles and defaulted on (ie: stopped paying) its bonds in year 6. During that year, Environ negotiated with bondholders on a debt restructuring deal which included extending the maturity of the bond 2 extra years (ie: from 10 years previously to 12 years), a full relief from coupon payments in years 7 and 8, a payment of coupons at a reduced rate of 3% per annum from years 9 to year 12, and a repayment of 70% of the face value in year 12. Under such conditions and assuming a discount rate of 7%, what would the value of the bond be? What would the bondholders profit/loss be relative to the face value of the bond?