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The bonds of swanson Corp. were rated as Aaa and issued at par a few weeks...

The bonds of swanson Corp. were rated as Aaa and issued at par a few weeks ago. the bonds have been downgraded to Aa2. Determine the new price of the bonds, assuming a 10-year maturity and semiannual interest payments.

Do mot round intermediate calculations and round your answer to 2 decimal places.

Aaa is 8.40%
Aa1 is 8.60%
Aa2 is 11.00%
Aa3 is 12.00%

What is the new price of the bonds?

Solutions

Expert Solution

As bond were issued at par, YTM = Coupon Rate

Coupon Rate = 8.40%

Calculating New Price,

Using TVM Calculation,

PV = [FV = 1,000, PMT = 42, N = 20, I = 0.11/2]

PV = $844.65

Bond Price = $844.65

jeff jeffy answered 2 years ago
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