On January 1, 2017, you purchased a 10-year bond issued by Alpha Inc. at par. The

bond features an 8% coupon ($40 every six months) and a par value of $1,000. Within

minutes of purchasing the bond, Alpha announced financial problems, and the terms of

the bond were renegotiated overnight. Going forward, Alpha will only pay a 6%

coupon ($30 every six months) and $800 at maturity. The YTM rose to 24.43% on

January 2, 2017.

What is the true discount rate (nominal annual rate with semi-annual compounding)

investors are applying to the renegotiated cash flows?