"Requirement: On January 1, 2017, you purchased a 10-year bond issued by Alpha Inc. at par. The bondfeatures an 8% coupon ($40 every six months) and a par value of $1,000. Within minutes of purchasingthe bond, Alpha announced financial problems, and the terms of the bond were renegotiated overnight.Going forward, Alpha will only pay a 6% coupon ($30 every six months) and $800 at maturity. The YTMrose to 24.43% on January 2, 2017.What are the true discount rate (nominal annual rate with semi-annual compounding) investors areapplying to the renegotiated cash flow?Rate of Return 1.04 1.122 1.0375 Year Cash Discountin Present Cash Discountin Present Discountin PresentFlows g Factor Value Flows g Factor Value g Factor Value 0.5 40.00 0.9638.4630.00 0.8926.74 0.9628.92 1 40.00 0.9236.9830.00 0.7923.83 0.9327.87 1.5 40.00 0.8935.5630.00 0.7121.24 0.9026.86 2 40.00 0.8534.1930.00 0.6318.93 0.8625.89 2.5 40.00 0.8232.8830.00 0.5616.87 0.8324.963 40.00 0.7931.6130.00 0.5015.04 0.8024.05 3.5 40.00 0.7630.4030.00 0.4513.40 0.7723.18 4 40.00 0.7329.2330.00 0.4011.94 0.7422.35 4.5 40.00 0.7028.1030.00 0.3510.65 0.7221.54 5 40.00 0.6827.0230.00 0.329.49 0.6920.76 5.5 40.00 0.6525.9830.00 0.288.46 0.6720.01 6 40.00 0.6224.9830.00 0.257.54 0.6419.29 6.5 40.00 0.6024.0230.00 0.226.72 0.6218.59 7 40.00 0.5823.1030.00 0.205.99 0.6017.92 7.5 40.00 0.5622.2130.00 0.185.34 0.5817.27 8 40.00 0.5321.3630.00 0.164.76 0.5516.65 8.5 0.51 0.140.53 40.0020.5330.004.2416.04 9 40.00 0.4919.7530.00 0.133.78 0.5215.46 9.5 40.00 0.4718.9930.00 0.113.37 0.5014.91 10 40.00 0.4618.2630.00 0.103.00 0.4814.37 1,000.010 0 0.46456.39800.00 0.1080.03 0.48383.111,000.0 0301.33800.00 Note:It is seen that when the bond was issued at 1000 it was trading at par i.e. its issue price, coupon rate andyield to maturity were equal. However with the changes in terms of the bond, the yield rose to 24%approve which is incorrect. Market Disequilibrium is established in such a scenario.We have recomputed the bond value at yield should be 7.50% at this stage. Since it is just at theinception there cannot be such a vast disequilibrium "