Several years ago, Castles in the Sand, Inc. issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond

Why don't you tell us what you think happened and we will help steer you in the right direction, but please do not ask us to do your homework for you.

Can someone help me with these two questions? Also how did you get the answers (the break down). Thank you.


Several years ago, Castles in the Sand, Inc. issued bonds at face value at a yield to maturity of 7 percent. Now with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?


Suppose that investors believe that Castles can make good on the promised coupon payments, but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investor will receive only 80 percent of face value at maturity. If they buy the bond today, what yield to maturity do they expect receive?

Need to give some kind of hint

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Sorry Kate, but we don't NEED to give some kind of hint.