Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. pybus, inc. is considering issuing bonds that will

Pybus, Inc. is considering issuing bonds that will mature in 16 years with an annual coupon...

Free

70.2K

Verified Solution

Question

Finance

Pybus, Inc. is considering issuing bonds that will mature in 16years with an annual coupon rate of 9 percent. Their par value willbe $1,000?, and the interest will be paid semiannually. Pybus ishoping to get a AA rating on its bonds? and, if it? does, the yieldto maturity on similar AA bonds is 11 percent. ? However, Pybus isnot sure whether the new bonds will receive a AA rating. If theyreceive an A? rating, the yield to maturity on similar A bonds is12 percent. What will be the price of these bonds if they receiveeither an A or a AA? rating?

Answer & Explanation Solved by verified expert
3.6 Ratings (321 Votes)

AA rating

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =16x2
Bond Price =? [(9*1000/200)/(1 + 11/200)^k]     +   1000/(1 + 11/200)^16x2
                   k=1
Bond Price = 851

A rating

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =16x2
Bond Price =? [(9*1000/200)/(1 + 12/200)^k]     +   1000/(1 + 12/200)^16x2
                   k=1
Bond Price = 789

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Pybus, Inc. is considering issuing bonds that will mature in 16years with an annual coupon rate of 9 percent. Their par value willbe $1,000?, and the interest will be paid semiannually. Pybus ishoping to get a AA rating on its bonds? and, if it? does, the yieldto maturity on similar AA bonds is 11 percent. ? However, Pybus isnot sure whether the new bonds will receive a AA rating. If theyreceive an A? rating, the yield to maturity on similar A bonds is12 percent. What will be the price of these bonds if they receiveeither an A or a AA? rating?

Other questions asked by students

Q

Let x be a random variable that represents the level of glucose in the blood (milligrams...

Statistics
Q

13. Rojan (Roy) worked for the Metropolis City Government. One day at work a co-worker approached...

General Management
Q

Obtain the general solution of the following equations: r Utt ? c^2 r Urr ? 2...

Advance Math
Q

1 m A 63 and m B 42 2 m B 39 and m C...

Geometry
Q

8. (Piecewise functions) Since each piece of a piecewise function is only graphed for part...

Basic Math
Q

8 Rewrite the following word phrase as a variable expression Five times a number t...

Algebra
Q

ABC Co. owns 35% of XYZ Co. At the beginning of the current year, ABC's...

Accounting
Q

If $842,000 of 12% bonds are issued at 102 1/2, what is the amount of...

Accounting
Q

An accounting firm uses billable hours as the cost driver for their office-wide overhead rate...

Accounting
Q

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility...

Accounting
Q

It is your first week on the job at PWC and you have been assigned...

Accounting
Q

On January 1, 2025, Puppies and Paws Inc (Puppies) leased a big puppy play gym...

Accounting