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Question:
You are a manager of FI that has made a four-year $15 million loan that pays annual interest of 7 per cent. The principal is due at the end of the third year.
a. One possible strategy is to sell this loan with recourse at an interest rate of 9 per cent. What price should FI receive for this loan?
b. The bank has the option to sell this loan without recourse at a discount rate of 9.2 per cent. What price should it receive for this loan?
c. If the bank expects a 1 per cent probability of default on this loan, is it better to sell this loan with or without recourse? It expects to receive no interest payments or principal if the loan is defaulted.
d. Discuss if the sale of the loan with recourse can change the duration characteristics of the balance sheet. How?
For each of the following distributions, given the population mean μ, and variance σ2 , derive the appropriate expressions for obtaining the actual pdf param- eters (α, β, or n, p) in terms of μ and σ2:
Comfort Shoe Corporation of England has decided to spin off its Tango Dance Shoe Division as a separate corporation in the US. The assets of the Tango Dance Shoe Division have the same operating risk characteristics as those of Comfort.
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What arbitrage opportunity do these figures present? Assuming no transaction costs, what would be your arbitrage profit per unit borrowed?
Ignore the time value of money in calculations, what is the profit (loss) from the total portfolio position of Ms. Taylor in the stock at each of four levels of
Kingston, Inc. management is considering purchasing a new machine at a cost of $3,877,780. They expect this equipment to produce cash flows of $803,166, $909,719, $959,088, $1,109,873, $1,272,031, and $1,103,970 over the next six years. If the ..
What were Kretovich's annual sales? Round your answer to the nearest cent.
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What are some of the significant news items and press releases made by the company over the last year? What is the Enterprise Value?
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