Andrew industries is contemplating issuing a 30-year bond, Ask an Expert

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Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 5.79 %(annual coupon payments) and a face value of $1,000. 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 5.29 % and yields on BBB-rated bonds are 5.69 %

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?

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Financial Management, Finance

Category:- Financial Management
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