Use the Information for the Question(s) Below -Suppose That When These Bonds Were Issued, Luther Received a to Raise

question 66

Multiple Choice

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 summarises the YTM for similar
ten-year corporate bonds of various credit ratings:
$\begin{array} { l c c c c c } \hline \text { Rating } & \text { AAA } & \text { AA } & \text { A } & \text { BBB } & \text { BB } \\\hline \text { YTM } & 6.70 \% & 6.80 \% & 7.00 \% & 7.40 \% & 8.00 \% \\\hline\end{array}$
-Suppose that when these bonds were issued, Luther received a price of $972.42 for each bond. What is the likely rating that Luther's bonds received?

• A) A
• B) B
• C) BBB
• D) AA

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Definitions:

Satisfaction Levels

Measures of how goods, services, or experiences meet or exceed expectations, often used in assessing customer or employee contentment.

Indifference Curve

A graph showing different combinations of two goods among which a consumer is indifferent, representing equal levels of satisfaction.

Total Utility

The total satisfaction or happiness derived from consuming a particular quantity of goods or services.

Indifference Curve

A graph representing combinations of two goods or services among which a consumer is indifferent, showing preferences.