Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Pybus, Inc. is considering issuing bonds that will mature in
21
years with an annual coupon rate of
12
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?Question content area bottom
Part 1
a. The price of the Pybus bonds if they receive a AA rating will be
$enter your response here.
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