A bonds credit rating provides a guide to its risk

Reference no: EM13594394

A bond's credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity of 8.2%. A-rated bonds sell at yields of 8.5%. Assume a 10-year bond with a coupon rate of 7.7% is downgraded by Moody's from Aa to A rating.

a. calculate initial price

b. calculate new price

Reference no: EM13594394

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