Problem:
A corporate bond with a 6.950 percent coupon has fourteen years left to maturity. It has had a credit rating of BB and a yield to maturity of 8.6 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 7.5 percent.
Required:
Question 1: What will be the change in the bond's price in dollars? (Assume interest payments are semiannual.)
Question 2: What will be the change in the percentage terms?
Note: Please show guided help with steps and answer.