Basic bond valuation Complex Systems has an outstanding issue of

$1,000-par-value

bonds with a

14%

coupon interest rate. The issue pays interest annually and has

19

years 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 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 were at

14%

instead of

9%,

what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.