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The yield to maturity for 10-year bonds is as follows for four different bond rating categories:...

The yield to maturity for 10-year bonds is as follows for four different bond rating categories: Aaa 9.40% Aa2 10.00% Aa1 9.60% Aa3 10.60% The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have just been downgraded to Aa2. Determine the new price of the bonds, assuming a 10-year maturity and semiannual interest payments. (Refer to “Semiannual Interest and Bond Prices” in Chapter 10 for a review if necessary.)
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Answer #1

The new price of the bonds assuming 10-year maturity

= 9.4%*1000/10%*(1-1/1.05^20)+1000/1.05^20

= 925.61

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