Question: 9 Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a 12% coupon interest rate. The issue pays interest annually and

9 9 Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value

Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a 12% coupon interest rate. The issue pays interest annually and has 12 years remaining to its maturity date. a. If bonds of similar risk are currently earning a rate of return of 8%, how much should the Complex Systems bond sell for today? b. Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond. c. If the required return is 12% instead, 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.)

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