Logit Co. plans to issue a 5 year bond outstanding with a face value of $1,000 and a semi-annual coupon rate of 6%. Currently the bond is rated AAA. The current risk-free rate is 3.5%.

a) what will the price of Logit Co.'s bond be?

b) Right before the bond issuance date, Logit Co. suffers from a sharp decline in productivity due to labor shortages. Its interest coverage ratio is now 2.44. Based on the interest coverage ratings table, what is Logit Co.'s credit rating? What is the price of its bond?

c) Will the price of Logit Co.'s bond increase after the first coupon is paid? Why?

Thank you!

SLQ2. Logit Co. plans to issue a 5 year bond outstanding with a face value of $1,000 and a semiannual coupon rate of 6%. Currently, the bond is rated AAA. The current risk-free rate is 3.5%. [Total: 7 marks] (a) What will the price of Logit Co.'s bond be? [3 marks] (b) Right before the bond issuance date, Logit Co. suffers from a sharf due to labor shortages. Its interest coverage ratio is now 2.44. Based on the interest coverage-credit ratings table, what is Logit Co.'s credit rating? What is the price of its bond? [2 marks] (c) Win ue price or Logit co:s bond increase after the first coupon is paid? Why? [2 marks]