$\begin{array}{llllll}
\text { Security: } & \text { AAA Corporate } & \text { AA Corporate } & \text { A Corporate } & \text { BBB Corporate } & \text { BB } \text { Corporate } \\hline
\text { Yield (\%): }&5.7&5.8&6.0&6.6&6.9
\end{array}$ Lloyd Industries raised $28 million in order to upgrade its roller kiln furnace for the production of ceramic tile. The company funded this by issuing 15-year bonds with a face value of $1000 and a coupon rating of 6.2%, paid annually. The above table shows the yield to maturity for similar 15-year corporate bonds of different ratings issued at the same time. When Lloyd Industries issued their bonds, they received a price of $962.63. Which of the following is most likely to be the rating these bonds received?

Question

Quizplus · Accepted Answer

The bond's price of $962.63 is below its face value, indicating a yield to maturity higher than the coupon rate of 6.2%. The yield to maturity for BBB-rated bonds is 6.6%, which is closest to the yield implied by the bond's price, suggesting a BBB rating.

Lloyd Industries Raised $28 Million in Order to Upgrade Its