Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of

6.05%

(annual coupon payments) and a face value of

$1,000.

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

5.55%,

and yields on BBB-rated bonds are

5.95%.

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

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