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What is the price impact of a 10-year corporate bond with a 5.75% coupon rate priced at par ($100) with an instantaneous 75bps widening in
What is the price impact of a 10-year corporate bond with a 5.75% coupon rate priced at par ($100) with an instantaneous 75bps widening in spread due to an issuer's recent announcement that they were adding a significant amount of debt to finance an acquisition which resulted in their debt being downgraded from Aa3 to A2, a 2-notch downgrade. Assume the bond has a Macaulay duration of 7.88 years and its convexity is 71.375. a) -5.71% b) 5.71% c) -5.39% d) 5.39%
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