What would be the current value of complex systems bond

Reference no: EM131943213

Question: Basic bond valuation Complex Systems has an outstanding issue of ?$1,000?-par-value bonds with a 8?%

coupon interest rate. The issue pays interest annually and has 13years remaining to its maturity date.

a. If bonds of similar risk are currently earning a rate of return of 7%, 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 8% instead of 7%, what would be the current value of Complex Systems' bond? Contrast this finding with your findings in part a and discuss.

Reference no: EM131943213

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