Assuming that Luther's bonds are rated AAA, their price 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 7.5% (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 6.60% 6.80% 6.90% 7.30% 7.80%
A) $1064
B) $1277
C) $1490
D) $852
Answer: A
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