Case Study: Bond Valuation - MedHealth Systems

Background Information

MedHealth Systems is a renowned health system operating multiple hospitals and clinics throughout the US. To modernize their facilities and equipment, MedHealth plans to issue a 15-year bond with a face value of $5,000 and a semi-annual coupon rate of 6%. Assume a discount rate of 8%.

Objectives

1. To comprehend the concept of bond valuation and its implications on investment decisions.
2. To apply bond valuation concepts in a real-world situation involving a healthcare provider.
3. Introduce ChatGPT to financial scenarios.

Materials Required

1. Basic understanding of the time value of money and bond terminologies such as face value, coupon payment, and yield to maturity.
2. ChatGPT

Tasks: Use ChatGPT to answer the following. Copy the prompt you used and GPT's output for each task in a Word document.

1. Calculate the Present Value of Coupon Payments: Determine the total annual coupon payment based on the coupon rate and face value, then divide it by two for the semi-annual payment. Calculate the present value of these cash flows using a given discount rate.

2. Calculate the Present Value of the Face Value: Find the present value of the face value of the bond that will be received at the end of the bond term (15 years) using the same discount rate.

3. Calculate the Bond Value: The bond's value is the sum of the present value of the coupon payments and the present value of the face value.

4. Summarize your experience with using ChatGPT for this assignment in one paragraph.