score, 20.91 %, 20t r p B9-6 (book/static) (Related to Checkpoint 9.3) (Bond val

Question

score, 20.91 %, 20t r p B9-6 (book/static) (Related to Checkpoint 9.3) (Bond valuation) Pybus, Inc. is considering issuing bonds that will Question Help mature in 20 years with an annual coupon rate of 8 percent its bonds and, if it does, the yield to maturity on similar AA par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on 8.5 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) However, Pybus is not sure whether the new bonds will receive a A raing. If they receive an A rating, the yield to maturity on similar A bonds is Enter your answer in the answer box and then click Check Answer part remaining Clear All Final Check

Explanation / Answer

AA Bond A Bond Face Value $1,000.00 $1,000.00 Coupon Payment = $1000 x 8%/2 40 40 Rate = 7.50%/2 ; 8.5%/2 3.75% 4.25% Period = 20 x 2 40 40 Present Value =PV(3.75%,40,-40,-1000) $1,051.38 $952.31 Present Value =PV(4.25%,40,-40,-1000)

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