What is the likely bond price before the downgrade

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A bond’s credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity of 7.6%. A-rated bonds sell at yields of 7.9%. Suppose that a 10-year bond with a face value of $1,000 and a coupon rate of 7.1% is downgraded by Moody’s from an Aa to A rating. Assume annual compounding.

What is the likely bond price before the downgrade? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Initial price $

Reference no: EM131448555

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