Find out the current value of the bond if present market

Reference no: EM13476990

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 bind 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 Oaks' four year bond had semiannual 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 than 7 percent because a semiannual coupon bond is slightly less risky than an annual coupon bond.)

c. Assume that Twin Oaks' bond had a semiannual coupon but 20 years remaining 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 increase price risk.)

Reference no: EM13476990

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