Question: (Bond valuation) Pybus, Inc. is considering issuing bonds that will mature in 25years with an annual coupon rate of 8percent. Their par value will be

(Bond valuation) Pybus, Inc. is considering issuing bonds that will mature in

25years with an annual coupon rate of

8percent. 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

9percent. 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

10percent. What will be the price of these bonds if they receive either an A or a AA rating?

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