WK7 11. Twin Oaks Health Center has a bond issue outstanding with a coupon rate of 7% 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% 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% semiannual required rate of return. The actual rate would be slightly less than 7% 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? (Assume a 7% semiannual required rate of return although the actual rate would probably be greater than 7% because of increased risk.) 11.4 Pacific Homecare has three bond issues outstanding. All three bonds pay $100 in annual interest plus $1,000 at maturity. Bond S has a maturity of five years, Bond M has a 15- year maturity, and Bond L matures in 30 years. a. What is the value of these bonds when the required interest rate is 5 percent, 10 percent, and 15 percent? b. Why is the price of Bond L more sensitive to interest rate changes than the price of Bond S? 12.4 assume that the risk-free rate is 6 percent and the market risk premium is 6 percent. The stock of physicians Care Network (PCN) has a beta of 1.5. The last dividend paid by PCN (D o ) was $2 per share. a. what would be PCNs stock value be if the dividend was expected to grow at a constant: -5 percent? 0 percent? 5 percent? 10 percent? b. what would be the stock value if the growth rate is 10 percent, but PCNs beta falls to 1.0? 0.5?
Looking for solution of this Assignment?
WHY CHOOSE US?
We deliver quality original papers |
Our experts write quality original papers using academic databases. |
Free revisions |
We offer our clients multiple free revisions just to ensure you get what you want. |
Discounted prices |
All our prices are discounted which makes it affordable to you. Use code FIRST15 to get your discount |
100% originality |
We deliver papers that are written from scratch to deliver 100% originality. Our papers are free from plagiarism and NO similarity |
On-time delivery |
We will deliver your paper on time even on short notice or short deadline, overnight essay or even an urgent essay |