Sometimes, bonds are completely worthless when a company defaults on payments. However, in practice, bonds typically have some market value (recovery rate) even after a default. Collingwood’s bonds are unsecured, but are senior to any other debt. Use the information in Table and the information in Practice Problem 30 to determine the value of thebonds.

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Type Senior secured Senior unsecured Senior subordinated Subordinated Junior subordinated All bonds Market Value/Par Value (%) 54.6 40.6 31.3 30.1 23.0 34.2