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James Corporation bonds pay 6% interest annually, with semiannual payments, maturing after 3 years. The company has serious financial problems and it may go bankrupt in any given year with a probability of 50%. In case of bankruptcy, the company will pay the interest payments for that year, plus $300 in principal at the end of the year. If it survives for three years, the investors will get full payment of interest and principal. What is the value of the bonds, using 10% as annual discount rate?

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