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Andrew Industries is contemplating issuing a 30 -year bond with a coupon rate of 7.01 % (annual coupon payments) $1,000 . Andrew believes it can get...

Andrew Industries is contemplating issuing a 30​-year bond with a coupon rate of 7.01 % ​(annual coupon​ payments) $1,000. Andrew believes it can get a rating of A from Standard​ & Poor's.​However, due to recent financial difficulties at the​ company, Standard​ & Poor's is warning that it may downgrade Andrew​ Industries' bonds to BBB. Yields on​ A-rated, long-term bonds are currently 6.48 % and yields on ​BBB-rated bonds are 6.85 %

a. What is the price of the bond if Andrew Industries maintains the A rating for the bond​ issue?

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

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Answer a) Price of the bond... View the full answer

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