Question

(Bond valuation)  ​Pybus, Inc. is considering issuing bonds that will mature in 21 years with an annual coupon rate of 8 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 8.5 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 9.5 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.)

Answer 1

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As nothing was mentioned excel is used. If you need with formula, let me know, will do that also. Thank you.