Multiple Choice
A corporate bond with an 8.5% coupon has 10 years left to maturity. It has had a credit rating of A and a yield to maturity of 10%. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BBB. The new appropriate discount rate will be 11.5%. What will be the change in the bond's price in dollars? Assume interest payments are paid semi-annually and par value is $1,000.
A) -$82.13
B) -$95.19
C) -$101.37
D) -$69.85
Correct Answer:
Verified
Correct Answer:
Verified
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