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1. If the interest rate rises, what happens to prices? What happens if a rating agency downgrades a bond? 2. Suppose a firm experiences worse
1. If the interest rate rises, what happens to prices? What happens if a rating agency downgrades a bond?
2. Suppose a firm experiences worse than expected sales, and moves closer to defaulting on its interest payments to bondholders. What will happen to the term structure of interest rates?
3. Suppose a firm issues 2 identical bonds, C and D, except that bond C is callable and is junior debt, whereas bond D is not callable and is senior debt. Which bond should have a higher coupon?
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