price of the bond be if it is downgraded, Financial Management

Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from Standard and Poor's. However, due to recent financial difficulties at the company, Standard and Poor's is warning that it may downgrade Andrew Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6.5%, and yields on BBB-rated bonds are 6.9%.

a.    What is the price of the bond if Andrew maintains the A rating for the bond issue?

b.    What will the price of the bond be if it is downgraded?

Posted Date: 3/14/2013 1:55:15 AM | Location : United States





I am facing some problems in solving the b part of this question please somebody help me out for this.

Posted by | Posted Date: 3/14/2013 1:56:40 AM


Related Discussions:- price of the bond be if it is downgraded, Assignment Help, Ask Question on price of the bond be if it is downgraded, Get Answer, Expert's Help, price of the bond be if it is downgraded Discussions

Write discussion on price of the bond be if it is downgraded
Your posts are moderated
Related Questions
Prepare a capital budget analysis of the following data, your analysis should determine WACC, Net Operating Cash Flow, NPV, IRR, PI, and Payback analysis. This analysis is for t

Limitations of participation: 1. Technology and organization today are so complex that specialized work roles are required making it difficult for people to participate succes

Determine the concept of Measuring the Rate of Return The rate of return is total return the investor receives during holding period (the period when security is owned or held

1. A standard arrangement for the orderly retirement of long-term debt calls for the corporation to make regular payments into a(n):      A)  custodial account.     B)  sinking

What are the main classes of institutions that issue bonds in the USA? There are three major classes of institutions which issue bonds in the USA: national governments, local g

How does price serve as a signal to resource owners? While consumers decide that a good or service is much more appealing than before, demand rises.  This makes a shortage at the

The issuers of ALBS are the financial subsidiaries of automobile manufacturers, commercial banks and other independent finance companies and small financial insti

NPV and Other Criteria Waddington International Inc. has $20 million to invest. It is considering whether to build a new factory in Western Canada. The land and the building wil

Discuss the applicability of the operating cycle to poultry business in Uganda(consider broilers)

Explain the Role of commission authorities Competition Directorate is one of the independent public bodies which help ensure healthy competition between companies which then be