Section 2 - Estimating Bond Valuation

Evergreen Hospital & Medical Research Centre plans to issue a tax-exempt bond at an annual coupon rate of 7 percent with a maturity of 15 years

The par value of the bond is $9,000

a) If the market rate is 7%, what is the value of the bond?

b) If the market rate falls to 6%, what is the value of the bond?

c) If the market rate rises to 11 %, what is the value of the bond?

d) At what market rate

- does the bond sell at a discount?

- does the bond sell at a premium