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Complex Systems has an outstanding issue of $1,000-par-value bonds with a 13% coupon interest rate. The issue pays interest annually and has 13 years 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 is 13% instead, 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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Part 1

a.If bonds of similar risk are currently earning a rate of return of 7%, the Complex Systems bond should sell today for $enter your response here.

(Round to the nearest cent.)

Part 2

b.Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond.(Select the best answer below.)

A. Since Complex Systems' bonds were issued, there may have been a shift in the supply-demand relationship for their product or a change in the risk towards loans.

B.Since Complex Systems' bonds were issued, there may have been a change in the number of bonds available or a change in the coupon interest rate.

C. Since Complex Systems' bonds were issued, there may have been a change in the supply-demand relationship for money or a shift in the investors' attitudes towards the firm.

D. Since Complex Systems' bonds were issued, there may have been a shift in the supply-demand relationship for money or a change in the risk towards the firm.

Part 3

c.If the required return were at 13% instead of 7%, the current value of Complex Systems' bond would be $enter your response here. Round to the nearest cent.)

Part 4

When the required return is equal to the coupon rate, the bond value is

the par value. In contrast in part a above, if the required return is less than the coupon rate, the bond will sell at a

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