Lloyd Industries raised $28 million in order to upgrade its roller kiln furnace for the production of ceramic tiles. The company funded this by issuing 15-year bonds with a face value of $1,000 and a coupon rate 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?
A) AA
B) A
C) BBB
D) BB

Question

Lloyd Industries raised $28 million in order to upgrade its roller kiln furnace for the production of ceramic tiles. The company funded this by issuing 15-year bonds with a face value of $1,000 and a coupon rate 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?
A) AA 
B) A 
C) BBB 
D) BB

Quizplus · Accepted Answer

C) Calculate the YTM of the bond with FV = $1,000, PMT = 62, and N = 15, which = 6.6%; the table shows that the bonds received a BBB rating.

Lloyd Industries Raised $28 Million in Order to Upgrade Its