According to an article in the Wall Street Journal, bonds issued in 2016 by the toy store chain Toys "R" Us that matured in 2018 and had a 10% coupon were trading at “31 cents on the dollar." Why would an investor sell one of these bonds for 31 cents on the dollar rather than hold the bond for two years and receive 100 cents on the dollar when the bond matured? Which of the following ratings is this bond likely to have received: AAA, BBB, or CCC? Briefly explain.

According to an article in the Wall Street Journal, bonds issued in 2016 by the toy store chain Toys "R" Us that matured in 2018 and had a 10% coupon were trading at “31 cents on the dollar." Why would an investor sell one of these bonds for 31 cents on the dollar rather than hold the bond for two years and receive 100 cents on the dollar when the bond matured? Which of the following ratings is this bond likely to have received: AAA, BBB, or CCC? Briefly explain.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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In 1994, you purchased a, $1,000 corporate bond issued by Boeing. At the time, the interest rate for the bond was 9.50 percent. Today, comparable bonds are paying 5.25 percent. What is the approximate dollar price for which you could sell your Boeing bond?
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