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A bond s credit rating provides a guide to its price. In early 2 0 1 2 , Aaa bonds yield 5 . 1 5

A bonds credit rating provides a guide to its price. In early 2012, Aaa bonds yield 5.15% and Baa bonds yield 5.85%. If some bad news causes a five-year bond with a coupon rate of 5% paid annually to be unexpectedly downrated from AAA to BBB, critically discuss what would be the effect on the bond price?

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