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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 the rate on similar-risk bonds is 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

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Answer:

The bond should sell for $1,156.47  

One reason accounting for a lower required rate of return could be that the rate of return changes according to market interest rate,hence when market rates falls,the required return also falls.

Also, it could be Complex Systems' credit rating is high,thereby paying a lower spread on the risk-free interest rate

The current value of the bond is $1000 if interest rises to 12%

Explanation:

Find detailed computation in the attached.

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