Question: 1. In 2012, Hospital Systems Inc. issued $750,000,000 worth of Series A Bonds. Assume that these 25-year bonds have a par value of $1,000 and a coupon rate of 5.25% with semi-annual payments. In 2017, five years after issuance, the required return on the Series A Bond Fund rises to 6%. (You can assume these are municipal tax exempt bonds if you like.)
a. If an individual purchased a bond at par in 2012, what is their current yield and capital gain yield in 2017?
b. What is the present value of the bond in 2017 when the required return on the bond rises to 6%?
c. If the bond was bought in 2017 at the valuation based on required rate of return of 6%, what is its yield to maturity with twenty years remaining?
d. What are Hospital Systems Inc.'s total debt service requirements?