Problema bonds credit rating provides a guide to its risk, Ask an Expert

Accounting

Problem:

A bond's credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity (YTM) of 4.3%. A-rated bonds sell at yields (YTM) of 3.6%. Assume a 10-year bond with a coupon rate of 5% is downgraded by Moodys from Aa to A rating.

Requirement:

Question 1: Calculate the new price.

Question 2: What's the new current yield?

Note: Provide support for your rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170372

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