Industries need to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:

Suppose that when these bonds were issued, (A) received a price of $972.42 for each bond. What is the likely rating that their bonds received?

Explain why the expected return of a corporate bond does not equal its yield to maturity (YTM)?

Rating Yield to Maturity (YTM) AAA 6.70% AA 6.80% A 7.00% BBB 7.40% BB 8.00%