Problem:
A bond's credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity (YTM) of 4.3%. A-rated bonds sell at yields (YTM) of 3.6%. Assume a 10-year bond with a coupon rate of 5% is downgraded by Moody%u2019s from Aa to A rating.
Required:
Question 1: Calculate the current price?
Question 2: What is the current yield?
Note: Show all workings.