Consider a corporation who recently filed Chapter 11 bankruptcy
(reorganization). Under the reorganization, the company has been
allowed to reorganize their debt structure with a consolidated new
deferral bond issue with more favorable terms. The new issue will be
a 30-year, 10.8% coupon rate bond with semiannual coupons.
However, under the bond indenture, the company is relieved of
making interest payments (deferred interest) for the first 7 years. The
reorganization calls for the deferred interest to be paid in a single
payment at maturity. Investors are demanding a yield to maturity of
9.8%.
What is the value of a new $1,000 par value bond?
Enter your answer rounded to the nearest dollar.