Reference no: EM131372850
Question 1: Suppose the estimated linear probability model used by an FI to predict business loan applicant default probabilities is PD = 0.03X1 + 0.02X2 - 0.05X3 + error, where X1 is the borrower's debt/equity ratio, X2 is the volatility of borrower earnings, and X3 is the borrower's profit ratio. For a particular loan applicant, X1 = 0.75, X2 = 0.25, and X3 = 0.10.
A. What is the projected probability of default for the borrower?
B. What is the projected probability of repayment if the debt/equity ratio is 2.5?
Question 2: The bond equivalent yields for U.S. Treasury and A-rated corporate bonds with maturities of 93 and 175 days are given below:
|
|
93 days
|
175 Days
|
|
Treasury strip
|
8.07%
|
8.11%
|
|
A-rated corporate
|
8.42
|
8.66
|
|
Spread
|
0.35
|
0.55
|
a. What are the implied forward rates for both an 82-day Treasury and an 82-day A-rated bond beginning in 93 days? Use daily compounding on a 365-day year basis.
b. What is the implied probability of default on A-rated bonds over the next 93 days? Over 175 days?
c. What is the implied default probability on an 82-day, A-rated bond to be issued in 93 days?
|
Create a pen object interactively using default constructor
: Refer to the documentation to be certain what each method does.
|
|
Write a method draw pentagon that draws a pentagon
: Write down four more color constants that are available in the Color class. Refer to the class's documentation to find out what they are.
|
|
What action do you feel compelled to take concerning
: You are a new patrol officer assigned with a veteran field training officer (FTO). He will be rating your performance for the next 16 weeks while you are on probation. His write-ups will make the determination on whether or not the police departme..
|
|
Compare happens to interest rates
: Compare what happens to interest rates during a business expansion cycle (i.e. when income increases) using the bond market framework and the liquidity preference framework. How do their predictions differ?
|
|
What is projected probability of default for the borrower
: What is the projected probability of default for the borrower? What is the projected probability of repayment if the debt/equity ratio is 2.5?
|
|
Prepare the journal entries and t-accounts
: ACCOUNTING CYCLE REVIEW PROBLEM - MFE6110 - Prepare the Journal Entries, T-accounts, and all four Financial Statements and Prepare the Journal Entries, T-accounts, and all four Financial Statements.
|
|
Find out about and describe other javadoc key symbols
: The Java API Documentation Generator (for example, at http:// download.oracle.com/javase/6/docs/technotes/tools/windows/javadoc. html). In this document, the key symbols are called javadoc tags.
|
|
Write an essay to outline your idea
: CIS8011 Case Based Learning Activity. You are a start up with a digital idea. Write an essay to outline your idea, its value proposition, revenue sources, cost structure, relevant customer and key activities and resources involved
|
|
How many entries are contained in a map
: What is the difference in the result of returning the words in a Hash Set compared with returning them in an Array List?
|