Question: A corporate bond with a 6 75 percent coupon has 10
A corporate bond with a 6.75 percent coupon has 10 years left to maturity. It has had a credit rating of BB and a yield to maturity of 8.2 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 7.1 percent. What will be the change in the bond’s price in dollars and percentage terms? (Assume interest payments are semiannual.)
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