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.