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Home Q & A Board Other Fields Homework Help Business Finance
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johnpaech johnpaech
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6 years ago
Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons, a coupon rate of 5%, and a face value of $1000. Wyatt Oil believes it can get a AAA rating from Standard and Poor's for this bond issue. What is the difference in the price the company will receive if the rating is BBB instead of AAA?
A) $97.17
B) $130.30
C) $0
D) $26.41
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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#1
6 years ago
D
Explanation:  D) If the company receives AAA: FV = 1000, N = 40, I = 2.4, PMT = 25, Compute PV = $1025.53
If the company receives BBB: FV = 1000, N = 40, I = 2.8, PMT = 25, Compute PV = $928.36
Difference = $1025.53 - 928.36 = $97.17
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