Question
Pybus, Inc. is considering issuing bonds that will mature in 22 years with an annual coupon rate of 7 percent. Their par value will be
Pybus, Inc. is considering issuing bonds that will mature in 22 years with an annual coupon rate of 7 percent. Their par value will be $1000, and the interest will be paid semiannually. Pybus is hoping to get an AA rating on its bondsand, if itdoes, the yield to maturity on similar AA bonds is 11.5 percent. However, Pybus is not sure whether the new bonds will receive an AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 12.5 percent. What will be the price of these bonds if they receive either an A or a AArating?
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