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Several years ago, AMD issued new bonds at face value with a yield-to-maturity of 6%. Now, with 5 years left until the maturity of the
Several years ago, AMD issued new bonds at face value with a yield-to-maturity of 6%. Now, with 5 years left until the maturity of the bonds, the company has run into some hard times and the rating on their bonds has had a negative impact on their bond prices. The yield-to-maturity is now at 7%. What has happened to the price of the bond? If investors believe that the company will make good on their coupon payments but MIGHT go bankrupt before the full value on their principal is returned, they now think that, at the most. they might get back only 90% of the face value at maturity. Knowing all this, if they were to buy this bond TODAY. what yield-tD-rnaturity would they expect to receive assuming interest rates remain the same until maturity? 0 $956 Price 0 $959 Price 0 $958 Price
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