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Consider the following trade: $100 Mil notional , 7 year interest rate swap in Vasiceck’s model with mean reversion 10%, interest rates volatility 100bps, struck at par 3%. Assume the interest rate curve is flat at 3%.
a) Compute the expected positive exposure and the 90% percentile of the positive exposure (PFE (90%). hint : you can use class s/s that already compute these quantities.
b) Assume that the counterparty CDS trades at 500 bps with 0% recovery. What is the CVA adjustment of the swap?
Circle K Stores has a bond issue with 10 years to maturity, $1,000 face value, 8% coupon interest compounded semiannually, that are callable in 5 years at $1050. The bonds currently sell in the market for $1,100. What is the yield to maturity?
Kennedy Air Services is now in the final year of a project. The equipment originally cost $30 million, of which 90% has been depreciated. Kennedy can sell the used equipment today for $7.5 million, and its tax rate is 35%. What is the equipment's aft..
Dominic takes out a 30-year mortgage of 140000 dollars at a nominal rate of interest of 7.32 percent convertible monthly, with the first payment due in one month. How much does he owe on the loan immediately after the 110th payment?
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 11.14 percent coupon rate and paid interest annually. It is now 9 years later. The current market rate of interest on the Bright Sun bonds is 8.82 percent..
Jonah’s Fishery has EBITDA of $67 million. Jonah’s market value of equity and debt is $433 million and $40 million, respectively. Jonah has cash on the balance sheet of $16 million. What is Jonah’s EV ratio?
1. the shareholders of jolie company have decided in favor of a buyout from pitt corporation. information about each
A firm that follows a residual dividend policy will probably have:
An investment of $60,000 is expected to return $26,00 in 6 months and $41,000 in 1 year. (a) compute the net present value of the investment at a rate of 14%. Is this investment attractove at this rate? (b) Compute the internal rate of return on the ..
Grummon Corporation has issued zero-coupon bonds with five-year maturity. (assume $100 face value bond) Investors believe there is a 25% chance that Grummon will default on these bonds. What will be the price of these bonds? what is the yield to matu..
What-if analyses are valuable aids in assessing a variety of planned and unplanned events. You will utilise the analysis you conduct here as part of the Final Project.
The H2O-Chemical Company is considering a new production facility on a plot of land that it already owns and it is located near a residential area. The land has a current market value of $1 million and was acquired 4 years ago for $600,000. If this p..
Creative Financing, Inc., is planning to offer a $1,000 par value 15-year maturity bond with a coupon interest rate that changes every 5 years. The coupon rate for the first 5 years is 10 percent, 10.75 percent for the next 5 years, and 11.5 percent ..
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