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Hi, Sir,
Appendix 1Although the credit rating if Conejo co declines from A to BBB, resulting the higher spot yield rates, the value of the does not change very much at all.
Becuz the increase in coupon and the resultant increase in value almost exactly matches the fall in value from the higher spot yield rates.
I don’t understand where does the fall in value from the higher spot yield rates from?
The bond value is the PV of the futures flows discount at the relevant spot yield rate.
The higher the rate at which a flow is discounted, the lower will be the PV and therefore the lower will be the value of the bond.
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