Question
1a. Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of (annual coupon payments) and a face value of . Andrew believes
1a. Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of (annual coupon payments) and a face value of . Andrew believes it can get a rating of A from Standard and Poor's. However, due to recent financial difficulties at the company, Standard and Poor's is warning that it may downgrade Andrew Industries bonds to BBB. Yields on A-rated, long-term bonds are currently , and yields on BBB-rated bonds are . a. What is the price of the bond if Andrew maintains the A rating for the bond issue? (Round to the nearest cent.) b. What will the price of the bond be if it is downgraded?
1b.Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 10%(annual payments). The yield to maturity on this bond when it was issued was 4%. a. What was the price of this bond when it was issued? (Round to the nearest cent.) b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?
1c.Suppose a seven-year, $1,000 bond with a(n) 6.76% coupon rate and semiannual coupons is trading with a yield to maturity of 4.05%. a. If the yield to maturity of the bond rises to 4.66% (APR with semiannual compounding), at what price will the bond trade? (Round to two decimal places.)
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