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Credit Spread in Basis Points Time to Maturity Rating 1 3 5 10 20 AAA 30 65 90 100 140 AA 50 95 110 135

Credit Spread in Basis Points

Time to Maturity

Rating

1

3

5

10

20

AAA

30

65

90

100

140

AA

50

95

110

135

170

A

90

125

175

200

250

BBB

120

150

220

250

300

BB

225

300

350

450

520

B

320

420

500

620

680

CCC

500

700

850

1050

1300

Central Perk Co. just issued 20-yr coupon bonds rated at BB. The bonds sold at their $100 par value. 20-yr treasury notes have a YTM of 3.6%.

After 10 years Central Perks bonds have been upgraded to A. Assuming credit spreads remain unchanged and that 10-yr treasury notes have a YTM of 3.5%, what is the new price of Central Perks bonds?

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