A fertiliser company holds 15 year, 15 per cent bond of ICICI bank ltd. The interest is payable quarterly.
The current market price of the bond is Rs 875. The company is going through a bad patch and has accumulated a substantial amount of losses. It is negotiating with the bank for restructing of debt. Recently,the interest rates have fallen and there is a possibility that bank will agree for reducing the interest rate for 12 percent. It is expected that the company will be able service debt to the reduce interest rates. calculate stated and the expected yeild to maturity.
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