Problem:
Let discuss bonds, either corporate or municipal. Recently, several companies have had their bond rating lowered by the major rating agencies due to accounting irregularities. What impact does a bond rating have on a bonds value or Yield to Maturity? What are some factors that affect the value of a corporate or municipal bond? Why is it necessary to value a bond in terms of today's dollars? And what is the impact of an increase in the prevailing interest rate on the valuation of a bond?