7-7       Indicate whether each of the following actions will increase or decrease a bond’s yield to maturity: a.        The bond’s price increases. b.       The bond is downgraded by the rating agencies. c.        A change in the bankruptcy code makes it more difficult for bondholders to receive payments in the event the firm declares bankruptcy. d.       The economy seems to be shifting from a boom to a recession. Discuss the effects of the firm’s credit strength in your answer. e.        Investors learn that the bonds are subordinated to another debt issue.

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