The following article appeared in the Wall Street Journal.
Bond Markets
Giant Commonwealth Edison Issue Hits Resale Market With $70 Million Left Over
NEW YORK--Commonwealth Edison Co.'s slow-selling new 9~% bonds were tossed onto the resale
market at a reduced price with about $70 million still available from the $200 million offered Thursday,
dealers said.
The Chicago utility's bonds, rated double-A by Moody's and double-A-minus by Standard
& Poor's, originally had been priced at 99.803, to yield 9.3% in 5 years. They were marked down
yesterday the equivalent of about $5.50 for each $1,000 face amount, to about 99.25, where their yield
jumped to 9.45%.
Instructions
(a) How will the development above affect the accounting for Commonwealth Edison's bond issue?
(b) Provide several possible explanations for the markdown and the slow sale of Commonwealth
Edison's bonds.