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Pybus Inc, is considering issuing bonds that will mature in 17 years with an annual coupon rate of 8 percent. The 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? The price of the Pybus bonds if they receive a AA rating will be?
Sagot :
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