QUESTION 12

PART A

PART B

PART C

(Related to Checkpoint 9.3) (Bond valuation) Pybus, Inc. is considering issuing bonds that will mature in 21 years with an annual coupon rate of 8 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 bonds and, if it does, the yield to maturity on similar AA bonds is 9 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 10 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 $ . (Round to the nearest cent.) (Related to Checkpoint 9.4) (Bond valuation) A bond that matures in 15 years has a $1,000 par value. The annual coupon interest rate is 9 percent and the market's required yield to maturity on a comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? a. The value of this bond if it paid interest annually would be $ (Round to the nearest cent.) (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 19-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $860 and the market's required yield to maturity on a comparable-risk bond is 12 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)