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 16 years remaining to its maturity date.

a) If bonds of similar risk are currently earning a rate of return of 11%,the Complex Systems bond should sell today for? Round to nearest cent

b) Describe two possible reasons why the rate on a similiar risk bonds is below the coupon interest rate on the complex systems bond Select the best answer

1) 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

2) Since complex systems bonds were issued, there may have been a change in the number of bonds available or a change in the coupon interst rate

3) Since complex systems bonds were issued, there may have been a change in the supply-demand realtionship for money or a shift in the investors attitudes toward the firm

4) 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.

C If the rquired return were at 12% instead of 11% the current value of complex systems bond would be_________round to nearest cent

d) When the required return is equal to the coupon rate, the bond value is (1)___________ the par value. In contrast in part a above, if the required return is less than the coupon rate, the bond will sell at a (2) _______ See below for choices

1) Equal to 2) Discount

Greater than Premium

Less than