Use the information for the question(s)below.
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 $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:
-What rating must Luther receive on these bonds if they want the bonds to be issued at par?
A)A
B)B
C)BBB
D)AA

Question

Use the information for the question(s)below.
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 $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: 
-What rating must Luther receive on these bonds if they want the bonds to be issued at par?
A)A 
B)B 
C)BBB 
D)AA

Quizplus · Accepted Answer

Luther must receive an A rating on these bonds if they want the bonds to be issued at par. This is because bonds with a higher rating are considered to be less risky and are therefore more likely to be purchased by investors. As a result, bonds with a higher rating can be issued at a lower interest rate, which makes them more attractive to investors.

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