Assuming that Luther's bonds receive a AA rating, the price of the bonds will be closest to ________
Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 6.0% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:
Rating AAA AA A BBB BB
YTM 6.63% 6.83% 6.93% 7.33% 7.83%
A) $1129
B) $941
C) $1318
D) $753
Answer: B
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