Complex Systems has an outstanding issue of $1,000 par-value bonds with a14% coupon interest rate. The issue pays interest annually and has 20 years remaining to its maturity date.

a.If bonds of similar risk are currently earning a rate of return of 12%, 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 12%, what would the current value of Complex Systems' bond be? Contrast this finding with your findings in part a and discuss.