QUESTION $9$

What are the possible reasons why this Coca Cola bond has lost so much value in just three years?

Investors think that Coca Cola may go bankrupt in the near term.

There is a lower demand for Coca Cola bonds in the market, this drives down its bond prices as buyers have more

bargaining power.

Investors don't trust Coca Cola's decision to use the proceeds to pay dividends to shareholders instead of increasing

its capital expenditures.

Since the bonds were issued, the general level of interest rates has risen due to inflationary pressures and monetary

policy changes. The Federal Reserve significantly raised its target rate, which affected the borrowing costs of

corporations and governments, and thus increased the yields of their bonds.

The stock and bond prices for Cocal Cola were badly hit when it was reported that Coca Cola hired Kirkland & Ellis, a

law firm well known for its expertise in corporate bankruptcy.