Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7.88 % (annual coupon payments) and a face value of $1 comma 000. Andrew believes it can get 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 7.38 %, and yields on BBB rated bonds are 7.78 %. 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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- Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 5.09% (annual coupon payments) and a face value of $1,000. Andrew believes it can get 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 BBB. Yields on A-rated, long-term bonds are currently 4.59%, and yields on BBB-rated bonds are 4.99%. 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?Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7.15% (annual coupon payments) and a face value of $1,000. Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently 6.59%, and yields on BBB-rated bonds are 6.84%. a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? b. What will be the price of the bond if it is downgraded?Andrew Industries is contemplating issuing a 30-vear bond with a coupon rate of 7.13% (annual coupon payments) and a face value of $1,000. Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently 6.49%, and yields on BBB-rated bonds are 6.87%. a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? b. What will be the price of the bond if it is downgraded? a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? If Andrew maintains the A rating for the bond issue, the price of the bond is S. (Round to the nearest cent.) b. What will be the price of the bond if it is downgraded? If it is downgraded, the new bond's price will be $. (Round to the nearest cent.)
- Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7 18% (annual coupon payments) and a face value of $1,000 Andrew believes it can get a rating of A from Standard & Poor's However, due to recent financial cues at the company, Standard & Poor's is waning that it may downgrade Andrew industres bonds to 608 Yields on Araled, kong tem bonds are currendy 6 49% and yelds on BBB-rated bonds are 5.82% Wha What will be the price of the bond e price of the bond Andrew lodusies martans the Arating for the bond downgrade What is the price of the bond if Andrew induties mariens Pe Arating for the bend Andre main the Araling for the bond issue, the price of the bond is found to the nearest cent)Tom Corp.'s bonds currently sell for $880. They have a 6.5% semiannual coupon rate and a 15-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return (annual) should an investor expect to earn if he or she purchases these bonds?A 9-year bond of a firm in severe financial distress has a coupon rate of 14% and sells for $940. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. Required: What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually.
- Taussig Corp.'s bonds currently sell for $960. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds? a. 5.5196 b. 7.46% c. 5.98% d. 6.72% e. 6.52%Taussig Corp.'s bonds currently sell for P1,150. They have a 6.75% annual coupon rate and a 15-year maturity, but they can be called in 6 years at P1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM?KIC Inc. plans to issue $7.2 million of bonds with a coupon rate of 16 percent paid semiannually and 36 years to maturity. The current one-year market interest rate on these bonds is 15 percent. In one year, the interest rate on the bonds will be either 18 percent or 9 percent with equal probability. Assume investors are risk neutral. a. If the bonds are non-callable, what is the price of the bonds today? (Do not round Intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price of the bonds $ $3,799,246.63 b. If the bonds are callable one year from today at $1,575, will their price be greater or less than the price you computed in part (a)? Greater than Less than c. If the bonds are callable one year from today at $1,575, what is the current price of the bond? (Do not round Intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current…
- Microsoft is considering issuing bonds that will mature in 20% with an 8% annual coupon rate. The par value is $ 1,000 and the interest will be paid semi-annually. Microsoft si hoping to get an AA credit rating on the bonds but is not sure of this will happen. If it does, the yield to maturity on similar AA rated bonds is 7.5%. However, if the bonds only receive an A rating the yield to maturity on similar A rated bonds is 8.5%. What will be the price of these bonds if they receive an A or AA rating? a. AA = $ 1,000 and A = $1,200 b. AA = $ 1,051.38 and A = $ 952.31 c. AA = $ 952.31 and A = $ 1,051.38 d. AA = $ 1,750 and A = $ 1,850A 10-year bond of a firm in severe financial distress has a coupon rate of 10% and sells for $900. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. what are the stated and expected yields to maturity of bonds? The bond makes its coupon payments annually. Do not round intermediate calculations. ( Round your answers to 2 decimal places.).Access Ltd is financing a new investment and was previously unsuccessful to secure a similar interest rate as they had with their previous debt from their local Bank. Given their AAA credit rating, they instead decided to issue 5000 units of a 10-year bond to fund the investment. Coupon rate is set at 8% per annum and will be paid quarterly. The face value of one of the bonds is $1,000. The estimated yield for similar bonds of comparable risk rating is 12% per annum. Determine the market price of the one of the bonds.