You Are the Owner of 100 Bonds Issued by Euler

question 76

Multiple Choice

You are the owner of 100 bonds issued by Euler, Ltd.These bonds have 8 years remaining to maturity, an annual coupon payment of $80, and a par value of $1,000.Unfortunately, Euler is on the brink of bankruptcy.The creditors including yourself, have agreed to a postponement of the next 4 interest payments (otherwise, the next interest paym would have been due in 1 year) .The remaining interest payments, for Years 5 through 8, will be made as scheduled The postponed payments will accrue interest at an annual rate of 6 percent, and they will then be paid as a lump sum maturity 8 years hence.The required rate of return on these bonds, considering their substantial risk, is now 28 perc What is the present value of each bond?

• A)$538.21
• B)$426.73
• C)$384.84
• D)$266.88
• E)$249.98

---

Definitions:

International Organization

International Organization may refer to any of various entities established by treaties or other agreements among nations, like the United Nations, aiming to foster cooperation in areas such as security, law, or economic policy.

Standardization

The process of implementing and developing technical standards to ensure compatibility and interoperability among different systems or products.

Metric Drawings

Engineering or technical drawings in which dimensions and measurements are indicated using the metric system, typically millimeters (mm) or meters (m).

Millimeters

A unit of length in the metric system equal to one thousandth of a meter, commonly used worldwide for many measurements.