Basic bond valuation; Complex Systems has an outstanding issue of
â$1, 000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 17years remaining to its maturity date.
A.If bonds of similar risk are currently earning a rate of return of
9%, how much should the Complex Systems bond sell forâ today?ââ
B.Describe the two possible reasons why the rate onâ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.
c.If the required return were at 15% instead of 9%, what would be the current value of Complexâ Systems' bond? Contrast this finding with your findings in part a and discuss.
a.If bonds of similar risk are currently earning a rate of return of 9%,
the Complex Systems bond should sell today forâââââ
â$(Round to the nearestâ cent.)
b. Describe the two possible reasons why the rate onâ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.â(Select the best answerâ below.)
A. Since Complexâ Systems' bonds wereâ issued, there may have been a shift in theâ supply-demand relationship for their product or a change in the risk towards loans.
B. Since Complexâ Systems' bonds wereâ issued, there may have been a shift in theâ supply-demand relationship for money or a change in the risk towards the firm.
C. Since Complexâ Systems' bonds wereâ issued, there may have been a change in theâ supply-demand relationship for money or a shift in theâ investors' attitudes towards the firm.
D. Since Complexâ Systems' bonds wereâ issued, there may have been a change in the number of bonds available or a change in the coupon interest rate.
C .If the required return were at 15â% instead of 9%, the current value of Complexâ Systems' bond would be $(Round to the nearestâ cent.)
When the required return is equal to the couponâ rate, the bond value is
â¼
A) equal to
B) greater than
C) less than
the par value. In contrast in part aâ above, if the required return is less than the couponâ rate, the bond will sell at a
â¼
A) discount
B) premium
â(its value will be greater thanâ par). â (Select the best answers from theâ drop-down menus.)
Basic bond valuation; Complex Systems has an outstanding issue of
â$1, 000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 17years remaining to its maturity date.
A.If bonds of similar risk are currently earning a rate of return of
9%, how much should the Complex Systems bond sell forâ today?ââ
B.Describe the two possible reasons why the rate onâ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.
c.If the required return were at 15% instead of 9%, what would be the current value of Complexâ Systems' bond? Contrast this finding with your findings in part a and discuss.
a.If bonds of similar risk are currently earning a rate of return of 9%,
the Complex Systems bond should sell today forâââââ
â$(Round to the nearestâ cent.)
b. Describe the two possible reasons why the rate onâ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.â(Select the best answerâ below.)
A. Since Complexâ Systems' bonds wereâ issued, there may have been a shift in theâ supply-demand relationship for their product or a change in the risk towards loans.
B. Since Complexâ Systems' bonds wereâ issued, there may have been a shift in theâ supply-demand relationship for money or a change in the risk towards the firm.
C. Since Complexâ Systems' bonds wereâ issued, there may have been a change in theâ supply-demand relationship for money or a shift in theâ investors' attitudes towards the firm.
D. Since Complexâ Systems' bonds wereâ issued, there may have been a change in the number of bonds available or a change in the coupon interest rate.
C .If the required return were at 15â% instead of 9%, the current value of Complexâ Systems' bond would be $(Round to the nearestâ cent.)
When the required return is equal to the couponâ rate, the bond value is
â¼
A) equal to
B) greater than
C) less than
the par value. In contrast in part aâ above, if the required return is less than the couponâ rate, the bond will sell at a
â¼
A) discount
B) premium
â(its value will be greater thanâ par). â (Select the best answers from theâ drop-down menus.)
