Abacus Inc. has asked you price a 5 year bullet bond issue for them‚ with Price‚ Yield to Maturity and Modified Duration. There are no comparable existing issues in the secondary market either by Abacus or a competitor and so you will need to price the issue from scratch. You have the following set of US Treasury bond data and consultations with your Bank Equity Analyst and Debt Analyst suggest that a Z-spread for Abacus of 200 bps over Treasuries and a coupon rate of 6.5% should be appropriate
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BOND PRICING CHAPTER 1 Floating Rate bonds * Floating rate bonds make interest payments that are tied to a measure of current market rates Example: Rate may be adjusted annually to the current T bill rate plus 2% * Major risk involved for floaters is due to the changes in the firm’s financial strength * Yield spread is fixed over life of security however if the firm’s strength deteriorates then investors would demand a greater yield premium * This makes the price of bonds
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Management of Depository Institutions 3505 Fall 2014 Problems: 1. A bank is planning to make a loan of $5‚000‚000 with duration of 7.5 years to “Jumbo Manufacturing”‚ a young and aggressive firm. The loan rate is 12% and the servicing fee is 50 basis points. The bank estimates that with a probability of 95%‚ the risk premium on the loan will not increase by more than 4.2%. The average cost of funds for the bank is 10 percent. The bank manager wants to use the RAROC approach to make a decision
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affecting Consumer Behaviour: Consumer behaviour refers to the selection‚ purchase and consumption of goods and services for the satisfaction of their wants. There are different processes involved in the consumer behavior. Initially the consumer tries to find what commodities he would like to consume‚ then he selects only those commodities that promise greater utility. After selecting the commodities‚ the consumer makes an estimate of the available money which he can spend. Lastly‚ the consumer analyzes
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are the risks of following this strategy? Bond Duration Qu 2: What is the Macaulay duration of a zero coupon bond maturing at time T? The Macaulay duration of a perpetual bond with yield y is given by (1+y)/y. Consider a bond portfolio consisting of 2 bonds where the proportion of assets in bond i (i=1‚2) is given by wi so total portfolio is P = w1 P1+w2 P2. Given the Macaulay Duration of bond I (i=1‚2) is given by Di what is the duration of the portfolio? You have a portfolio of 500‚000
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Consumer behavior towards the new packaging of FMCG products. The importance of packaging design as a vehicle for communication and branding is growing in competitive markets for packaged FMCG products. This research utilized a focus group methodology to understand consumer behavior toward such products. The challenge for researchers is to integrate packaging into an effective purchasing decision model‚ by understanding Consumer’s behavior towards the packaging of FMCG products. When consumers search
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MIT Sloan Finance Problems and Solutions Collection Finance Theory I Part 1 Andrew W. Lo and Jiang Wang Fall 2008 (For Course Use Only. All Rights Reserved.) Acknowledgements The problems in this collection are drawn from problem sets and exams used in Finance Theory I at Sloan over the years. They are created by many instructors of the course‚ including (but not limited to) Utpal Bhattacharya‚ Leonid Kogan‚ Gustavo Manso‚ Stew Myers‚ Anna Pavlova‚ Dimitri Vayanos and Jiang Wang. Contents 1
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FAMILY INFLUENCE ON CONSUMER HOME APPLIАNCES PURCHASING BEHAVIOR: AN EMPIRICAL STUDY IN DHAKA CITY Thesis Proposal On FAMILY INFLUENCE ON CONSUMER HOME APPLIАNCES PURCHASING BEHAVIOR: AN EMPIRICAL STUDY IN DHAKA CITY. Table of Content Content | Page | 1.0 Introduction | 4 | 1.1 Background of the study | 4 | 1.2 Rational of the study | 5 | 1.3 Scope and objectives | 5 | 1.4 Research questions | 6 | 1.5 Hypotheses | 7 | 2.0 Methodology | 9 | 2.1 Research
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MA6620 Advanced Actuarial Science Visualization of Macaulay duration as a point of total immunization | | | | | | | | | | | | | | | | | | | • A Numerical Example In this section we consider a basic numerical immunization example. Suppose you are
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zero-coupon bond with a face value of $1‚402‚552. The bond is trading at a yield to maturity of 7.00 percent. The historical mean change in daily yields is 0.0 percent‚ and the standard deviation is 12 basis points. a. What is the modified duration of the bond? b. What is the maximum adverse daily yield move given that we desire no more than a 5 percent chance that yield changes will be greater than this maximum? c. What is the price volatility of this bond?
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