Multiple Choice
A corporate bond with an 8.5 percent coupon has 10 years left to maturity. It has had a credit rating of A and a yield to maturity of 10 percent. 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 percent. What will be the change in the bond's price in dollars? Assume interest payments are paid semiannually 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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