Pybus, Inc. is considering issuing bonds that will mature in 23 years with an an
ID: 2765271 • Letter: P
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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