Hide Assignment Information Instructions Instructions: After reading Chapter 11

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Instructions
Instructions:
After reading Chapter 11 in the Gapenski and Reiter text, solve the problems found in the Assignment #4 Word document below. Responses should be in Times New Roman, 12-point font, one-inch margins, and single-spaced. The completed assignment should not exceed three pages in length. If you use an Excel spreadsheet to solve the problems, embed your Excel work in the Word document using the embed function, allowing you to still only submit a single Word document. This assignment should be completed individually. Your finished homework file should be named using the First initial of your first name_Your last name_Module_4_Homework (i.e., J_Smith_Module_4_Homework).
Problems: (found on the Assignment #4 Word document linked below)
11.1 Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value.
Suppose that two years after the bonds were issued, the required interest rate fell to 7 percent. What would be the bonds’ value?
Suppose that two years after the bonds were issued, the required interest rate rose to 13 percent. What would be the bonds’ value?
What would be the value of the bonds three years after issue in each scenario above, assuming that interest rates stayed steady at either 7 percent or 13 percent?
11.2 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 bond pays interest annually.
Determine the current value of the bond if present market conditions justify a 14 percent required rate of return.
Now, suppose Twin Oaks’s four-year bond has 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.)
Assume that Twin Oaks’s 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 increased price risk.)
11.5 Minneapolis Health System has bonds outstanding that have four years remaining to maturity, a coupon interest rate of 9 percent paid annually, and a $1,000 par value.
What is the yield to maturity on the issue if the current market price is $829?
If the current market price is $1,104?
Would you be willing to buy one of these bonds for $829 if you required a 12 percent rate of return on the issue? Explain your answer.
11.7 Regal Health Plans issued a 12 percent annual coupon bond with a $1,000 par value a few years ago. The bond now has ten years remaining to maturity and sells for $1,100. The bond has a call provision that allows Regal to call the bond in four years at a call price of $1,060.
What is the bond’s yield to maturity?
What is the bond’s yield to call?
Submission Instructions:
Before submitting your assignment, be sure to review the grading rubric.
When you have completed work on the Assignment #4 Word document by solving all problems, please upload your work below as a Word document. All assignments should be completed and uploaded prior to the Live Session.
MHA-GP-2861_CFHO_Assignment__4.docx
Hide Rubrics
Rubric Name: CAP Finance – Homework Problem Set Grading Rubric
Criteria
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
Criterion Score
Complete all parts of the Homework Problem Set and be punctual in submitting the assignment. Responses should demonstrate a clear understanding of the subject matter content.
0 points
Student does not
complete the
Homework
Problem Set as
assigned.
8 points
15 points
55 points
Student
completes some
parts of the
assignment.
Student
demonstrates a
developing
understanding of
the content by
attempting to
provide
applicable
responses.
70 points
Student
completes most
parts of the
assignment in a
timely manner.
Student
demonstrates a
moderate
understanding of
the content by
providing correct
and/or related
responses.
85 points
Student
completes all
parts of the
assignment in a
timely manner.
Student
demonstrates a
superior and
thorough
understanding of
the content by
providing correct
and relevant
responses.
Score of Complete all parts of the Homework Problem Set and be punctual in submitting the assignment. Responses should demonstrate a clear understanding of the subject matter content.,/ 85
Criteria
Level 1
Level 2
Level 3
Criterion Score
Comment on questions throughout the modules when prompted.
0 points
Student does not
comment on
embedded
questions
throughout the
module.
8 points
Student provides
some comments
on the
embedded
questions.
15 points
Student provides
thorough
comments on all
embedded
questions.
Score of Comment on questions throughout the modules when prompted.,/ 15
Total
Score of CAP Finance – Homework Problem Set Grading Rubric,/ 100
Overall Score
Level 1
0 points minimum
Level 2
8 points minimum
Level 3
15 points minimum
Level 4
55 points minimum
Level 5
70 points minimum
Level 6
85 points minimum
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