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

a) A niche market refers to a lucrative and small market segment. Marketing strategy is targeted and concentrated at this specific market segment. Pink Ladies are specifically targ

What is Cost of Equity Capital? Describe please.

What are agency problems? and between what two stakeholders do agency problem typically occur?

1. (a) A barbell is a approach of maintaining a portfolio of securities concentrated at two extremes in terms of maturity date very short term and very long term. A positive

Q. Calculation of WMCC? The calculation of WMCC requires several steps to be taken and is subject to the following assumptions: 1) The WMCC is calculated on the basis of market

Nortel is considering the purchase of a new  call routing system.  The system will cost $50M to purchase, an additional $7M to install, and will last for 30 years.  The CCA rate as

a) The combined two-firm concentration ratio of Motorola (approximately 17.5%) and Nokia (35%) is around 52.5% of the market. b) Up to 2 marks for correct definition: Market sha

Clearing and Settlement The Treasury Bills are available in physical form if an investor desires so. The market is mostly dominated by institutional players who have a facility

Suppose you are planning to make regular contributions in equal payments to an investment fund for your retirement. Which formula would you use to figure out how much your investme