Question
A $5,000 face value corporate bond with 8.25 percent coupon (paid semiannually) has 15 years left to maturity. It has had a credit rating of
A $5,000 face value corporate bond with 8.25 percent coupon (paid semiannually) has 15 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.55 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 8.75 percent. What will be the change in the bonds price in percentage terms?
| -8.22% | ||
| -10.00% | ||
| -9.16% | ||
| -12.09% | ||
| -9.75% |
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Short Term Financial Management
Authors: Terry S. Maness, John T. Zietlow
3rd Edition
0324202938, 978-0324202939
