What will the price of the bond be if it is? downgraded

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Andrew Industries is contemplating issuing a? 30-year bond with a coupon rate of 7.00 % ?(annual coupon? payments) and a face value of $ 1 comma 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 6.50 %?, and yields on? BBB-rated bonds are 6.90 %.

a. What is the price of the bond if Andrew maintains the A rating for the bond? issue? (Round to the nearest cent)

b. What will the price of the bond be if it is? downgraded?

Reference no: EM132224108

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