LandoToys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5 percent coupon bond, which pays interest semiannually. The bond will mature in 10 years and is currently priced in the market as $1,037.19. The average yields to maturity for 10-year corporate bonds are reported in the following table by bond rating.

Bond Rating	Yield (%)	Bond Rating	Yield (%)
AAA	5.4	BB	7.3
AA	5.7	B	8.2
A	6.0	CCC	9.2
BBB	6.5	CC	10.5
		C	12.0
		D	14.5

Periodically, one company will purchase another by buying all of the target firms stock. The bonds of the target firm continue to exist. The debt obligation is assumed by the new firm. The credit risk of the bonds often changes because of this type of an event.

Suppose that the firm Treasure Toys makes an announcement that they are purchasing LandoToys. Due to Treasure Toys projected financial structure after the purchase, Standard & Poors states that the bond rating for LandoToys bonds will change to BB.

A. How do the bond investors feel about the announcement?

B. Explain the positives and negatives of purchasing a company.