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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 12 years remaining to its
maturity date.
a. If bonds of similar risk are currently earning a rate of return of 11%, 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 15% instead, what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.
a. If bonds of similar risk are currently earning a rate of return of 11%, the Complex Systems bond should sell today for
(Round to the nearest cent.)"
Transcribed Image Text:K
Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 12 years remaining to its
maturity date.
a. If bonds of similar risk are currently earning a rate of return of 11%, 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 15% instead, what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.
a. If bonds of similar risk are currently earning a rate of return of 11%, the Complex Systems bond should sell today for
(Round to the nearest cent.)
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