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? A) FV-1000 PMT (Payment Per Period)-120 N 16 Rate 10.00% PV $1,156.47 So the Bond must sell for $1,156.47 b) Describe the two possible reasons why the rate on similar risk bonds is below the coupon interest rate on the Complex Systems bond. B) Two possible reason could be: 1) The current real interest rate is 10% 2) Credit rating of similar bond is higher (that is they are less risky).
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