Question
(Bond valuation) Pybus, Inc. is considering issuing bonds that will mature in 18 years with an annual coupon rate of 7 percent. Their par value
(Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 18
years with an annual coupon rate of 7 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bondsand, if itdoes, the yield to maturity on similar AA bonds is 10 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an Arating, the yield to maturity on similar A bonds is 11 percent. What will be the price of these bonds if they receive either an A or a AArating?
a. The price of the Pybus bonds if they receive a AA rating will be $ (Round to the nearestcent.)
b.What will be the price of these bonds if they receive a Arating?
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
