A bonds credit rating provides a guide to its risk. Suppose that long-term bonds rated Aa currently offer yields to maturity of 4.8%. A-rated bonds sell at yields of 5.1%. Suppose that a 10-year bond with a coupon rate of 4.9% is downgraded by Moodys from an Aa to A rating.

a. Is the bond likely to sell above or below par value before the downgrade?

• Above par value

• Below par value

b. Is the bond likely to sell above or below par value after the downgrade?

• Above par value

• Below par value