Question 8( Mango Inc. is going to issue a 30-year bond with a coupon rate of 5,00% (with 2 coupon payments per year) and a face value of $1 000. Mango Inc. believes it can be rated A by Standard and Poor's. However, because of recent financial difficulties at the company, Standard and Poor's is warning that it may downgrade Mango Inc. Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6,00% (quoted as an annual percentage rate (APR)), and yields on BBB-rated bonds are 9,20% (quoted as APR). What is the % change in the price of the bond if it is downgraded? Instructions: Round the result to two decimal places and do not put the "%" symbol in the answer box. For example if you get a result of -7.5432% then write -7.54 in the answer box below.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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Question 8(
Mango Inc. is going to issue a 30-year bond with a coupon rate of 5,00% (with 2
coupon payments per year) and a face value of $1 000. Mango Inc. believes it can be
rated A by Standard and Poor's. However, because of recent financial difficulties at
the company, Standard and Poor's is warning that it may downgrade Mango Inc.
Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6,00%
(quoted as an annual percentage rate (APR)), and yields on BBB-rated bonds are
9,20% (quoted as APR). What is the % change in the price of the bond if it is
downgraded?
Instructions: Round the result to two decimal places and do not put the "%" symbol
in the answer box. For example if you get a result of -7.5432% then write -7.54 in
the answer box below.
Transcribed Image Text:Question 8( Mango Inc. is going to issue a 30-year bond with a coupon rate of 5,00% (with 2 coupon payments per year) and a face value of $1 000. Mango Inc. believes it can be rated A by Standard and Poor's. However, because of recent financial difficulties at the company, Standard and Poor's is warning that it may downgrade Mango Inc. Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6,00% (quoted as an annual percentage rate (APR)), and yields on BBB-rated bonds are 9,20% (quoted as APR). What is the % change in the price of the bond if it is downgraded? Instructions: Round the result to two decimal places and do not put the "%" symbol in the answer box. For example if you get a result of -7.5432% then write -7.54 in the answer box below.
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