(Related to Checkpoint 9.3)(Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 17...
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(Related to Checkpoint 9.3)(Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 17 years with an annual coupon rate of 11 percent. Their par value will be $1 comma 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 11.5 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 A bonds is 12.5 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 $
(Round to the nearest cent.)
b.The price of the Pybus bonds if they receive an A rating will be $
(Round to the nearest cent.)
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