Question
(Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 22years with an annual coupon rate of 11percent. Their par value will be $1
(Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 22years with an annual coupon rate of 11percent. Their par value will be $1 comma 000
,and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 7
percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is8
percent. What will be the price of these bonds if they receive either an A or a AA rating?
a. The price of the Pybus bonds if they receive a AA rating will be
$nothing
.
(Round to the nearest cent.)
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