Problem:
A 9-year bond of a firm in severe financial distress has a coupon rate of 10% and sells for $940. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments.
Required:
Question: What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually.
Note: Explain all steps comprehensively.