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The bonds of Micromachines have an 8% annual coupon, face value of $1000 and mature in four years. Bonds of equivalent risk yield 12%. The
The bonds of Micromachines have an 8% annual coupon, face value of $1000 and mature in four years. Bonds of equivalent risk yield 12%. The company is having cash flow problems and has asked its bondholders to accept the following deal: The firm would like to make the next 2 coupon payments at half the scheduled amount, and make up for this by adding $80 to the final coupon payment. If the company goes ahead with this plan what will be the new price of the bond?
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