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1 . A $ 1 , 0 0 0 face value corporate bond with a 6 . 7 5 percent coupon ( paid semiannually )

1. A $1,000 face value corporate bond with a 6.75 percent coupon (paid semiannually) has 10
years left to maturity. It has had a credit rating of BB and a yield to maturity of 9 percent. The
firm recently became more financially stable and the rating agency is upgrading the bonds to
BBB. The new appropriate discount rate will be 6.1 percent. What will be the change in the
bonds price in percentage terms?

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