Question: 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

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 10% rate of return, how much should the Complex Systems bond sell for today?
b. Describe the two possible reasons why similar-risk bonds are currently earning a return below the coupon interest rate on the Complex Systems bond.
c. If the required return were at 12% instead of 10%, what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.

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a Price I PVIFA I n FV PVIF I n 120 PVIFA 10 16 1000 PVIF 10 16 120 78237 1000 ... View full answer

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