The following ratings and corresponding yields apply to all coupon and zero coupon bonds in this problem.
AAA=3.20
AA=3.30
A=3.50
BBB=3.90
BB=4.50
The company plans to issue five-year bonds with a face value of $100 an a coupon rate of 4.5% (annual payments). What will the price of a coupon bond with AA rating be?
What must the coupon payment of these AA coupon bonds be for them to sell at par?
The company plans to tissue five-zero coupon bonds with a face value of $100. What would the price of a zero-coupon bond with BBB rating be?