You are the owner of 100 bonds issued by Georgia Corporation. These bonds have

8 years remaining to maturity, an annual coupon payment of $80, and a par value of

$1,000. Unfortunately, Georgia Corp. is on the brink of bankruptcy, and the

creditors, including yourself, have agreed to a postponement of the next 4

interest payments. The remaining interest payments will be made as scheduled.

The postponed payments will accrue interest at an annual rate of 6% and will be

paid as a lump sum at maturity 8 years hence. The required rate of return on

these bonds, considering their substantial risk, is now 28%. What is the present

value of each bond? [$266.88 answer]