Ingram Systems Ltd. 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.

1. Why is it important for management accountants to understand the bonds valuation process?
2. What are the three key inputs to the valuation process?
3. If bonds of similar risk are currently earning a 10% rate of return, how much should the Ingram systems bond sell for today.
4. Describe the two possible reasons why similar-risk bonds are currently earning a return below the coupon interest rate on the Ingram systems bond.
5. If the required return were at 12% instead of 10%, what would be the current value of Ingram systems’ bond? Contrast this finding with your findings in part (a) and discuss.
6. If the required return on a bond differs from its coupon interest rate, describe the behaviour of the bond value over time as the bond moves towards maturity.