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P6-15: Basic bond valuation Complex Systems has a...

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P6-15: Basic bond valuation 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? bond be? Contrast this finding with your findings in part a and discuss.

 

Paper#5418 | Written in 18-Jul-2015

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