Andrew Industries is contemplating issuing a

30-year

bond with a coupon rate of

7.04%

(annual coupon payments) and a face value of

$1,000.

Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently

6.44%,

and yields on BBB-rated bonds are

6.76%.

a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue?

b. What will be the price of the bond if it is downgraded?