Problem:
The bonds of Columbia Gas paid no interest in 1993 because the firm had declared bankruptcy. One issue of these bonds, the 8 1/4 percent coupon bonds due in 1996, was selling at 109% of par value, or for approximately $1,090.
Required:
Question: Why would someone pay $1,090 for the bonds of a bankrupt firm?
Note: Show supporting computations in good form.