# P 6-15 Work - P 6-15. Basic bond valuation Complex Systems...

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should the Complex Systems bond sell for today? coupon interest rate on the Complex Systems bond. and discuss. Coupon rate*par value = coupon payment 12%*\$1000= \$120 per payment (I am presuming in years) 10% is the yield \$1000 is the par value PV is the price you pay today PV = C/(1+y) + C/[(1+y)^2] + C/[(1+y)^3] + . .. + C/[(1+y)^t] + par val/[(1+y)^t] PV = 120/1.1 + 120/1.21 + 120/1.331 +. .. + 120/4.6 + 1000/4.6 PV=\$1187 you pay \$1187 for the bond today b. Describe the two possible reasons why similar-risk bonds are currently earning a return below th PV = 120/1.12 + 120/1.2544 + . ..120/6.1 + 1000/6.1 PV = \$1000 FV -1000 PMT (Payment Per Period) -120 N 16 Rate 12.00% PV \$1,000.00 current vaule is lower wen at 12% I would choose the 10% P 6-15. Basic bond valuation Complex Systems has an outstanding issue of \$1,000-parvalue bonds with a 12% a. If bonds of similar risk are currently earning a 10% rate of return, how much b. Describe the two possible reasons why the rate on similar-risk bonds is below the

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## This note was uploaded on 04/22/2011 for the course FIN & ACC 504 & 502 taught by Professor Harper&tai during the Spring '11 term at Grand Canyon.

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P 6-15 Work - P 6-15. Basic bond valuation Complex Systems...

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