Question: please answer a and b Andrew industries is contemplating issuing a 30 year bond with a coupon rate of 10.57% (annual coupon payments) and a

please answer a and b

Andrew industries is contemplating issuing a 30 year bond with a coupon rate of 10.57% (annual coupon payments) and a face balue of $1,000. Andrew believes it can grt 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 10.07%, and yields on BBB-rated bonds are 10.47%.

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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