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
Q. Location of lifting anchors in precast concrete units? It is desirable that position of anchors be located symmetrical to the centre of gravity of precast concrete units. Or

Keys Printing plans to issue a $1,000 par value, 10-year noncallable bond with a 5.00% coupon, paid semiannually. It should sell at par. The company''s marginal tax rate is 40.00%

PARTICIPANTS IN THE SECONDARY MARKET The players in the secondary capital market include: Individual Investors (Public). Companies. Mutual funds. Financial Insti

What are the benefits of “paying late” (but not too late) and how do companies attempt to do this? Since money has time value, the later cash is paid, but not as well late, the b

Q. Major objective of working capital management? The major objective of working capital management is to decide the optimum amount of working capital required. Usually managem

It is the exercise price at which the investor or the bondholder exchanges the bond for shares.

Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity??? Also explain the hoe can ew calculate the external equity? Help me

You've just won a huge $100 million lottery.  You've decided to invest your winnings in the following way:  $30 million in real estate,  $30 million in  corporate bonds and $40 mil

#questThe managing directors of three profitable listed companies discussed their companies'' dividend policies at a business lunch. Company A; has deliberately paid no dividends