Question
The yield to maturity for 10-year bonds is as follows for different bond rating categories. AAA = 5%, AA = 6%, A = 7%, BBB
- The yield to maturity for 10-year bonds is as follows for different bond rating categories.
AAA = 5%, AA = 6%, A = 7%, BBB = 7.2%
The bonds of ABC Corporation were rated as AA and issued at par a few weeks ago. The bonds have just been downgraded to A.
(a) In your opinion, what could be a potential reason for this change in grade of the bond?
(b) Determine the new price of the bonds, assuming a 10-year maturity and semi-annual interest payments.
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Mergers Acquisitions And Other Restructuring Activities
Authors: Donald DePamphilis
9th Edition
0128016094, 978-0128016091
