You also know that bonds with similar risk are selling at


The ABC Co. is in financial trouble and it is expected that it will file for bankruptcy protection by evening. You hold a $1,000 face value bond of the company paying annual coupons and maturing in 10 years. You expect that after the bankruptcy filing the firm will stop paying annual coupons and the only payment to bondholders will be $0.50 for every $1.00 of face value in two years. You also know that bonds with similar risk are selling at YTM of 15%. What should be the price of ABCs' bonds?

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Finance Basics: You also know that bonds with similar risk are selling at
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