1 analyze the structure of the variable rate debt described

Reference no: EM13380617

1. Analyze the structure of the variable rate debt described in the case (UPDATES, VRDOs, etc.). ?(a) Explain the put, call and cap features and their respective importance. ?(b) At what rate should this debt trade? Do you agree with Merrill Lynch's assessment of J.J. Kenny minus 55bpts? How did Merrill arrive at this rate?

2. Compare three forms of debt - fixed rate debt, floating rate debt (with JJK, say) - and explain for each what risks the issuer and investor bear, respectively.

3. Analyze the fixed rate alternatives as proposed by Bankers' Trust and Merrill Lynch. Which one is more favorable for the State of Connecticut?

4. Analyze the State of Connecticut's alternatives including a fixed for LIBOR (one or three months) swap with AIG. Assume AIG will quote the rates given in Exhibit 1 of the case. Which one would you recommend?

5. What part of the analysis could benefit from explicit term structure modelling? How would you use a (statistical) model of the term structure of interest rates? What additional infor- mation could be gained, what are possible disadvantages?

6. How useful are synthetic fixed-rate debt instruments in your opinion? Why would anybody want to construct such instruments? What are their advantages and disadvantages?

Reference no: EM13380617

Questions Cloud

1what is the proportion of females at statcrunchu determine : 1.what is the proportion of females at statcrunchu determine a range of plausible values for this proportion. is this

Consider the following investment cash flowsyearcash : consider the following investment cash flowsyearcash flow020001200020315004250054000a. what is the present year 0 value

For the next fiscal year you forecast net income of 50000 : for the next fiscal year you forecast net income of 50000 and ending assets of 500000. your firms payout ratio is 10.

Alice has now been investing for several years and she : alice has now been investing for several years and she would like to build an investment portfolio. her investment

1 analyze the structure of the variable rate debt described : 1. analyze the structure of the variable rate debt described in the case updates vrdos etc.. ?a explain the put call

1 what effect would the following actions have on a firms : 1. what effect would the following actions have on a firms current ratio? assume that net working capital is positive.

The 2010 balance sheet of marias tennis shop inc showed : the 2010 balance sheet of marias tennis shop inc. showed long-term debt of 3.1 million and the 2011 balance sheet

1 a very small countrys gross domestic product is 12 : 1. a very small countrys gross domestic product is 12 million.a. if government expenditures amount to 7.5 million and

Southface sportswear corporationbalance sheet - december 31 : southface sportswear corporationbalance sheet - december 31 2012assetsnbspliabilities andstockholders

User Account

All Pages