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. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.


Aaa	8.60%
Aa1	8.80%
Aa2	9.00%
Aa3	10.00%

The bonds of Falter Corporation were rated as Aa1 and issued at par a few weeks ago. The bonds have just been downgraded to Aa3. Determine the new price of the bonds, assuming a 10-year maturity and semiannual interest payments.

Expert Solution

YTM of bond when it was issued = 8.60%

YTM of bond when it is downgraded = 10%.

Par Value of Bond = $1,000

Price of bond is calculated in excel and screen shot provided below:

Formula spreadsheet

jeff jeffy answered 8 months ago

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