Question
Pybus, Inc. is considering issuing bonds that will mature in 25 years with an annual coupon rate of 11 percent. Their par value will be
Pybus, Inc. is considering issuing bonds that will mature in
25
years with an annual coupon rate of
11
percent. 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
10.5
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 is
11.5
percent. What will be the price of these bonds if they receive either an A or a AA rating?
Question content area bottom
Part 1
a. The price of the Pybus bonds if they receive a AA rating will be
$5.75
.
(Round to the nearest cent.)
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