A Corporate Bond with an 8

question 57

Multiple Choice

A corporate bond with an 8.5 percent coupon has 10 years left to maturity. It has had a credit rating of A and a yield to maturity of 10 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BBB. The new appropriate discount rate will be 11.5 percent. What will be the change in the bond's price in dollars? Assume interest payments are paid semiannually and par value is $1,000.

• A) −$82.13
• B) −$95.19
• C) −$101.37
• D) −$69.85

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Definitions:

Vessel Elements

Components in the xylem of plants that transport water and nutrients vertically.

Cuticle

The protective layer found on the outer surface of leaves, stems, and other organs of plants.

Collenchyma

A type of plant tissue characterized by its living, elongated cells with unevenly thickened walls, providing support and flexibility.

Water and Minerals

Essential components for biological organisms, facilitating metabolic processes and structural functions.