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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:
-Assuming that Luther's bonds receive a AAA rating,the price of the bonds will be closest to:
A)$1021.
B)$1014.
C)$1000.
D)$937.

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: 
-Assuming that Luther's bonds receive a AAA rating,the price of the bonds will be closest to:
A)$1021. 
B)$1014. 
C)$1000. 
D)$937.

Quizplus · Accepted Answer

AAA rating typically indicates a lower risk, which often results in a higher bond price due to increased demand. Therefore, the bond price would be closest to $1021, the highest option given.

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