Complex Systems has an outstanding issue of $1,000?-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 20 years remaining to its maturity date.
a. If bonds of similar risk are currently earning a rate of return of 12?%, 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 15?% instead of 12?%, what would be the current value of Complex? Systems' bond? Contrast this finding with your findings in part a and discuss.