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Find What will be price of the bonds if receive an A rating

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Pybus, Inc. is considering issuing bonds that will mature in 16 years with an annual coupon rate of 7 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 12 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 13 percent.

Problem 1: What will be the price of these bonds if they receive either an A or a AA rating?

a. A rating Round to the nearest cent

b. AA rating Round to the nearest cent

Reference no: EM132730526

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