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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
Twin Oaks Health Center has a bond issue outstanding with a coupon rate of percent and four years remaining until maturity. The par value of the bond is $ and the bond pays interest annualy. Using Excel, answer the following questions.
a Determine the current value of the bond if present market
conditions justify a percent required rate of return.
b Now, suppose Twin Oaks's fouryear bond had semiannual
coupon payments. What would be its current value? Assume a
percent semiannual required rate of return. However, the actual
rate would be slightly less than percent because a semiannual
coupon bond is slightly less risky than an annual coupon bond.
c Assume that Twin Oaks's bond had a semiannual coupon but
years remaining to maturity. What would be the current value
under these conditions? Again assume a percent semiannual
required rate of return, although the actual rate would probably
be greater than percent because of increased price risk.
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