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Question:
(a)
i. Expected loss= Exposure amount* probability of default* loss given default
ii. Positive covenants= covenants that showing the direction to a company. Positive covenants are affirmative and helps the company to set the right strategy.
iii. Securitization- technique of bundling and off-loading risks that a financial institution does not want to maintain in his books.
(b) Covenants help mitigate credit risk. Covenants are terms and conditions attached to a facility. Any breach of covenant may result in the Bank recalling facilities.
Types of covenants: working capital ratios; leverage; tangible net worth; dividend and capital expenditure restrictions; cash flow covenants.
Rules: Keep it simple; Focus on the borrower; Set the appropriate covenant level; Don't underestimate term risk; Never waiver; Keep records.
GeKay is now considering issuing $3 million in debt, and paying $150,000 yearly in interest at 5%, that it would keep rolling over "forever" (in perpetuity). The proceeds would
#Minimum 100 words accepted#
The cost of capital for a firm can differ from the cost of capital for each of its businesses. When a firm has multiple businesses, it is important to use the cost of capital appro
I have an assignment
is cash considered to be additive to this method of valuation?
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mystore retail has about $200 000 in credit sales each month.mystore factors all these invoices at a 5% fee.what is the effective annual (%) cost of this action?
Question 1: i) Each of the following statements has been put forward as an explanation of determinants of exchange rate: a) ‘the increase in the value of a currency is becau
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