Illusion Enterprises issued 8%, 10-year bonds with a face value of $1,000. Interest is paid annually at the end of each year.

Over the course of six years, Illusion has lost market share as a result of quality control difficulties and has incurred substantial costs due to lawsuits. The firm has a current ratio of just less than 1.0 and a debt ratio of 90%.

Although the company believes it can recover, in order to compensate for the increased level of risk, investors require 15% interest on similarly risky bonds.

The bond has four years remaining until maturity.

You are a risk tolerant investor and would like to calculate the expected market price for this bond.

Please calculate the following:

1. The present value of the lump sum payment.
2. The present value of the interest income.
3. The expected present value of the bond.