Determine the current value of the bond, Corporate Finance

QUESTION

Assume Venture Healthcare sold bonds that a 10 year maturity, a 12% coupon rate with annual payments, and a $1,000 par value.

a. Suppose that two years after the bonds were issued the required interest rate fell to 7%. What would be the bonds value?

b. Suppose that two years after the bonds were issued the required interest rate rose to 13%. What would be the bond's value?

c. What would be the value of the bonds three years after issue if the rate was steady at 7%

d. What would be the value of the bonds three years after issue if the rate was steady at 13%

QUESTION

Twin Oaks Health Center has a bond issue outstanding with a coupon rate of 7% 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% required rate of return?


b. Suppose Twin Oaks four year bond had semiannual coupon payments. What would be its current value? (assume a 7% semiannual required rate of return. The actual rate would be slightly less than 7% because a semiannual coupon bond is slightly less risky than an annual coupon bond)

c. Assume that Twin Oaks bond had a semiannual coupon rate but 20 years remaining to maturity. What is the current value under these conditions? (assume a 7% semiannual required rate of return although the actual rate would probably be greater than 7% because of increased price risk).

QUESTION

Minneapolis Health System has bonds outstanding that have four years remaining to maturity a coupon interest rate of 9% paid annually and a $1,000 par value.

a. What is the yield to maturity on the issue if the current market price is $829?

QUESTION

Six years ago Bradford Community Hospital issues 20 year municipal bonds with a 7% annual coupon rate. The bonds were called today for a $70 premium - that is bondholders received $1,070 for each bond.

a. What is the realized rate of return for those investors who bought the bonds at $1,000 when they were issued?

Posted Date: 2/19/2013 1:33:06 AM | Location : United States







Related Discussions:- Determine the current value of the bond, Assignment Help, Ask Question on Determine the current value of the bond, Get Answer, Expert's Help, Determine the current value of the bond Discussions

Write discussion on Determine the current value of the bond
Your posts are moderated
Related Questions
Roman Roads has a number of capital projects available for investment this year but has access to a limited amount of capital.  Specifically, the firm has arranged to secure a $25

determine the pay \back period for the project.

What will be impact on the operating leverage of a firm, if it proceeds for additional borrowings?

The bulk of products is produced in South East Asia, and hence the lead time to Western retailers is long. The typical lead time from fabric manufacturers is 3 months (Gutgeld and

Question 1: (a) Explain clearly two semi-strong form tests of the Efficient Market Hypothesis (EMH), one supporting and one rejecting the EMH. (b) Summarise the evidence in

WACC calculation

MOUNTAIN BLEND SPECIALITY COFFEE CO Mountain Blend Speciality Coffee Co, a listed company, is the largest coffee wholesaler and roaster in Carvania. At present it is solely invo

What is American Financial Group WACC?

What is an agent? What are the responsibilities of an agent? Ans: An agent is someone who has the implied or actual authority to act on behalf of another.  The owners whom the

Solution of the Black-Scholes model is obtained through a transformation into a heat equation. The general one-dimensional heat equation is given by where α > 0 is a consta