The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and mature in four years. Bonds of equivalent risk yield 15%. Microhard is having cash flow problems and has asked its bondholders to accept the following deal: The firm would like to make the next three coupon payments at half the scheduled amount, and make the final coupon payment be $250. If this plan is implemented, the market price of the bond will (rise/fall) to ___________. (Continue to assume a 15% required return.)

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The Answer of The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and mature in four years. Bonds of equivalent risk yield 15%. Microhard is having cash flow problems and has asked its bondholders to accept the following deal: The firm would like to make the next three coupon payments at half the scheduled amount, and make the final coupon payment be $250. If this plan is implemented, the market price of the bond will (rise/fall) to ___________. (Continue to assume a 15% required return.)

The Bonds of Microhard, Inc