Question: Basic bond valuation Complex Systems has an outstanding issue of 1,000-par-value bonds with a12% coupon interest rate. The issue pays interest annually and has 14

Basic bond valuation Complex Systems has an outstanding issue of 1,000-par-value bonds with a12% coupon interest rate. The issue pays interest annually and has 14 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 were at 12% instead of 8%, what would be the current value of Complex Systems' bond? Contrast this finding with your findings in part a and discuss.

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