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demashi
Well, it was the last part of number one i answered as i was time pressured. I didnt have time to talk about tax benefits and all. But i still mentioned some parts while mixing up others.
How ever, for the ratings, i used the post issue. Im not sure of being accurate. But the question stated that they were going to issue the debt after becoming listed and their credit rating were to drop to AA from A. so i used AA.
I could be wrong. But i think some marks should only be lost for selecting the wrong rating. That shouldn’t make one miss marks for follow on questions like macauly duration and Modified Duration
Did u attempt question 4?.
@mfe100 said:
can you tell me what he was looking for in q! b (ii) – implications of Bonds issuesWell this is what i thought:
a. issuing the first bond at a discount or premium and at 6% coupon. I got a premium for this one about 1 to 2% premium. So the company gets to raise more money but pays interest based on the face value and pays the face value of the bond at redemption.
b. i got a coupon rate of 5 point something. (assuming this is correct and issued at par as stated in the question) then the company receives only the exact amount raised (no premium or discount) and will then pay this smaller coupon rate (5%) on the exact amount issued.
So the financial implication of the first will be that the company raises higher funds with a premium. but pays interest based on the par value. While the second will be that the company raises lower amount (at par) while paying less annual interest.
Which would you think is more beneficial?
@lizzyopen said:
Hi Kitty,On question 2 I remember it saying futures are not required. But the it said we should review both hedging choices (collars and futures)which were futures now collars.
This threw me back abit.
yeahh…. i had this same problem. But then i think you would need to calculate futures first in order to calculate Option on futures. By the way how did you guys answer number 4? I totally freestyled it.