Pybus, Inc. is considering issuing bonds that will mature in 21 years with an annual coupon...

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Pybus, Inc. is considering issuing bonds that will mature in 21years with an annual coupon rate of 11 percent. Their par valuewill be ?$1,000?, and the interest will be paid semiannually. Pybusis hoping to get a AA rating on its bonds? and, if it? does, theyield to maturity on similar AA bonds is 10.5 percent. ? However,Pybus is not sure whether the new bonds will receive a AA rating.If they receive an A? rating, the yield to maturity on similar Abonds is 11.5 percent. What will be the price of these bonds ifthey receive either an A or a AA? rating?
a. The price of the Pybus bonds if they receive a AA rating willbe ?$_. ? (Round to the nearest? cent.)
b. The price of the Pybus bonds if they receive a A rating willbe ?$_. ? (Round to the nearest? cent.)

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3.8 Ratings (632 Votes)

a 104208b 96120ExplanationThe formula to find bond price when interest is paidsemiannually iswhere C is the coupon payment ie Annual Coupon Rate FaceValue 011 1000 110r is rate of return or YTM ie 105 or See Answer

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Pybus, Inc. is considering issuing bonds that will mature in 21years with an annual coupon rate of 11 percent. Their par valuewill be ?$1,000?, and the interest will be paid semiannually. Pybusis hoping to get a AA rating on its bonds? and, if it? does, theyield to maturity on similar AA bonds is 10.5 percent. ? However,Pybus is not sure whether the new bonds will receive a AA rating.If they receive an A? rating, the yield to maturity on similar Abonds is 11.5 percent. What will be the price of these bonds ifthey receive either an A or a AA? rating?a. The price of the Pybus bonds if they receive a AA rating willbe ?$_. ? (Round to the nearest? cent.)b. The price of the Pybus bonds if they receive a A rating willbe ?$_. ? (Round to the nearest? cent.)