Question: Pybus Inc is considering issuing bonds that will mature in
Pybus, Inc. is considering issuing bonds that will mature in 20 years with an 8 percent annual coupon rate. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get an AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 7.5 percent. However, Pybus is not sure whether the new bonds will receive an AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 8.5 percent. What will be the price of these bonds if they receive either an A or an AA rating?
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