. Assum venture healthcare sold bonds that have a 10 year maturity,a 12 percent coupon rate with annual payment and a $1,000 per value
a. Suppose that two years after the bonds were issued, the required interest fell 7 percent. what would the bonds value?
b. Suppose that two years after the bonds were issued, the required interest rate rose to 13 percent. what would be the bond value?
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c. what would be the value of the bonds three years after issue in each scenario above, assuming that interest rates stayed steady at either 7 percent or 13 percent.
2. Twin Oaks Health Center has a bond issue outstanding with a coupon rate of 7 percent and four years remaining until maturity. the par value of the bond is $1,000 and the bond pays interest annually.
a. determine the current value of the bond if present market conditions justify a 14 percent required rate of return.
b. Now suppose Twin Oak four year bond had semiannula coupon payments. what would be its current value? (Assume a 7 percent semiannual required rate of return. However the actual rate would be slightly less risky than an annual coupon bond)
c. Assume that Twin Oak bond had a semiannual coupon but 20 years remainning to maturity. what is the current value under these conditions? ( Again, assume a 7 percent semiannual required rate of return. although the actual rate would probably be greater than 7 percent because of incresed price risk)
3. Minneapolis Health System has a bonds outstanding that have four years remaining to maturity, a coupon interest rate of 9 percent paid annually and a $1,000 per value
a. what is the yeild to maturity on the issue if the current market price is $829?
b. If the current market price is $1,104?
c. Would you be willing to buy one of these bonds for $829 if you are required a 12 percent rate return on the issue? explain your answer
4. Six years ago, Bradford Community Hosiptal issued 20 year municipal bonds with a 7 percent annual coupon rate. the bonds were called today for a $70 call premium that is, bondholders received $1,070 for each bond. what is the relized rate of return for those investors who bought the bonds for $1,000 when they were issued?
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