(Bond valuation). Pybus, Inc. is considering issuing bonds that will mature in 19 years with an annual coupon rate of 7%. Their par value will be $1000, 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 12%. However, Pybus is not sure whether the new bonds will receive a double a AA rating. If they receive an A rating, the yield to maturity on a similar A bonds is 13%. 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 $_____.
b. The price of the Pybus bonds if they received an A rating will be $_____.