Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 10.93 % (annual...
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 10.93 % (annual coupon payments) and a face value of $ 1,000. 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 10.43 %, and yields on BBB-rated bonds are 10.83 %.
a. What is the price of the bond if Andrew maintains the A rating for the bond issue?
b. 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 10.93 % (annual...
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Thank you!
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