Yesterday, bonds for Cougar Cremary were traded for the yield-to-maturity of 7.2

Question

Yesterday, bonds for Cougar Cremary were traded for the yield-to-maturity of 7.28%, which were downgraded by S&P from A to BBB today. If everything else is constant from yesterday (expected inflation rate etc.):

Yesterday, bonds for Cougar Cremary were traded for the yield-to-maturity of 7.28%, which were downgraded by S&P from A to BBB today. If everything else is constant from yesterday (expected inflation rate etc.): the bonds' yield-to-maturity should be higher than 7.28%. the bonds' coupon rate should be higher than 728%. the bonds, current yield should be higher than 7.28% O the bonds' price should increase. All of the above None of the above

Explanation / Answer

the bonds yield to maturity should be higher than 7.28%

the above is answer..

because rating downgrade will add risk which lowers the bond price so the yield to maturity will rise from current levels

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