Pybus, Inc. is considering issuing bonds that will mature in  20 years with an annual coupon rate of 11 percent. Their par value will be ​$1,000​, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds​ and, if it​ does, the yield to maturity on similar AA bonds is 12 percent. ​ However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A​ rating, the yield to maturity on similar A bonds is 13 percent. What will be the price of these bonds if they receive either an A or a AA​ rating? a. The price of the Pybus bonds if they receive a AA rating will be ​$ ______

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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Chapter6: Fixed-income Securities: Characteristics And Valuation
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 ​(Bond valuation)  ​Pybus, Inc. is considering issuing bonds that will mature in  20 years with an annual coupon rate of 11 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. 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 ​$ ______ 

 

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