Bond to fund large product expansion project

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Reference no: EM131960356

Your firm is considering issuing a 20-year bond to fund a large product expansion project.

Though existing bonds of your firm have a credit rating of AA and a credit spread of 60 basis points (0.60%), with the new debt issuance your firm's bonds have been downgraded to A. The coupon rate of the new issue has already been set at 3.0%, but yields on similar maturity corporate bonds with an A rating are currently at 4.0%.

Assuming the new bond will make semi-annual coupon payments, what price will the bond likely trade at in the current market?

Enter your answer with at least 4 decimal places. Do not include a negative sign. Assume 100 face amount.

Reference no: EM131960356

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