Question
A $1,000 face value corporate bond with a 6.5% coupon (paid semiannually) has 15 years left to maturity. It has had a credit rating of
A $1,000 face value corporate bond with a 6.5% coupon (paid semiannually) has 15 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.2%. The firm has recently got into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 8.5%. What will be the change in the bond's price in dollars and percentage terms?
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Options Futures and Other Derivatives
Authors: John C. Hull
10th edition
013447208X, 978-0134472089
