Pybus, Inc. is considering issuing bonds that will mature in 23 years with an annual coupon rate of 6 percent. Their p
Posted: Sun May 29, 2022 5:53 pm
Pybus, Inc. is considering issuing bonds that will mature in
23 years with an annual coupon rate of 6 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 9.5 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 10.5 percent.
What will be the price of these bonds if they receive either an
A or a AA rating?
23 years with an annual coupon rate of 6 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 9.5 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 10.5 percent.
What will be the price of these bonds if they receive either an
A or a AA rating?