1. 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?
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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