16 Basic bond valuationPlease answer A

Complex Systems has an outstanding issue of $1,000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has

12 years remaining to its maturity date.

AIf bonds of similar risk are currently earning a rate of return of 8%, how much should the Complex Systems bond sell for today?

BDescribe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond.

CIf the required return were at 15% instead of 8%, what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.

A.If bonds of similar risk are currently earning a rate of return of 8%, the Complex Systems bond should sell today for

-----------------. (Round to the nearest cent.)

B.Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond.(Select the best answer below.)

a. Since Complex Systems' bonds were issued, there may have been a change in the number of bonds available or a change in the coupon interest rate.

b. Since Complex Systems' bonds were issued, there may have been a change in the supply-demand relationship for money or a shift in the investors' attitudes towards the firm.

c. Since Complex Systems' bonds were issued, there may have been a shift in the supply-demand relationship for their product or a change in the risk towards loans.

d. Since Complex Systems' bonds were issued, there may have been a shift in the supply-demand relationship for money or a change in the risk towards the firm.

CIf the required return were at 15% instead of 8%, the current value of Complex Systems' bond would be ____________(Round to the nearest cent.)

When the required return is equal to the coupon rate, the bond value is _________

1. equal to

2. greater than

3. less than

the par value. In contrast in part a above, if the required return is less than the coupon rate, the bond will sell at ____________ (its value will be greater than par).

1. discount

2. premium