[ahmar]

please refer to Dec 2011 Question 3 “LEVANTE Co”

https://www.accaglobal.com/content/dam/acca/global/pdf/p4_2011_dec_q.pdf

We are required to calculate the Market Value of the bond (which will be the value at which it will be issued to investors)

The bond is a 5% coupon, par value $100, 5 yr, Rating A

We are given a credit spreads table. Its simply a matter of choosing the right credit spread and discounting the bonds cash flows to arrive at market value.

PROBLEM

instead of choosing the 5 yr credit spread for A rating for all the years (112 bp + 5% = 6.12%) the answer uses a SEPERATE discount rate for each years cash flow.

yr1 . 3·85% .$5
yr2 . 4·46% .$5
yr3 . 5·07% . $5
yr4 . 5·80% . $5
yr5 . 6·12% . $105

https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p4_2011_dec_a.pdf

Now refer to question “Do It Yourself”. In this question they use a SINGLE discount rate chosen from the credit spread table for each years payment. I have seen in other questions as well that the SINGLE discount rate is used for all years. So if a bond is a 10 yr bond, the 10 yr yield spread is used for all the years.

kindly tell why two different methods are chosen ???

[ahmar]

my question is that why future contract is not closed out and no gain/loss calculated in future sontracts???

[ahmar]

forward rate is calculated as follows:
=142x(1+(.085+.0025)/3)/(1+(.022-.0030)/3)=145.23

my question is why we are dividing rates with 3???

thanks

[ahmar]

kindly also elaborate otc option given in this question.
Thanx.

[ahmar]

Sir in this question for basis points 25 and 30 why r we taking.0025 and .0035 rather then .25 and .30
Thanks

[ahmar]

could you please elaborate calculation of forward rate in this question.
thanks.

[ahmar]

sir i have a confusion regarding this question that:
how do we know that what is current exposure of galeplus before swap and what is their exposure after swap???
means whether galeplus is currently paying fixed or floating interest rate and whether it wants to achieve fixed or floating interest rate exposure after swap??
this thing is not mentioned anywhere in question!!!

kindly help me!!!

[ahmar]

I have chosen topic 8: but i am confused about how to do competitor analysis appropriately means whether to do competitor analysis with my main company or do it separately and whether to do it on single year or over three years.

[Author]

Posts