Pybus, Inc. is considering issuing bonds that will mature in 23 years with an an

Question

Pybus, Inc. is considering issuing bonds that will mature in 23 years with an annual coupon rate of 9 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? The price of the Pybus bonds if they receive a AA rating will be $ squarebox. (Round to the nearest cent.)

Explanation / Answer

The Price of Pybus Inc.if they recieve AA rating

The par value =$ 1000 Maturity =23 years coupon rate =9% Yield to maturity=12%

formula = i/2(PVIFA Kd/2,2n)+MV(PVIF Kd/2,2n)

I= coupon intrest =$ 90 Kd=12% , n= 23 years

90/2(PVIFA 6%,46)+1000(PVIF,6%,46) =$767.134

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