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2. The yield to maturity for 10-year bonds is as follows for different bond rating categories. AAA = 5%, AA = 6%, A = 7%,
2. The yield to maturity for 10-year bonds is as follows for different bond rating categories. AAA = 5%, AA = 6%, A = 7%, BBB = 7.2% The bonds of ABC Corporation were rated as AA and issued at par a few weeks ago. The bonds have just been downgraded to A. (a) In your opinion, what could be a potential reason for this change in grade of the bond? (b) Determine the new price of the bonds, assuming a 10-year maturity and semi-annual interest payments.
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