To calculate the price of the bond, we need to use the present value formula:
PV = C / (1 + r)^n + F / (1 + r)^n
Where:
PV = Present value of the bond
C = Annual coupon payment
r = Required rate of return
n = Number of years remaining until maturity
F = Face value or par value of the bond
In this case, the annual coupon payment is $120 (12% of $1,000), the required rate of return is 10%, the number of years remaining until maturity is 16, and the face value is $1,000. Plugging these values into the formula, we get:
PV = $120 / (1 + 0.10)^16 + $1,000 / (1 + 0.10)^16
PV = $1,000
Therefore, the Complex Systems bonds should sell for their face value of $1,000 today.