Calculate the price duration and convexity of the bond

Reference no: EM131067214

SECTION I - BOND ANALYSIS

Question 1- Given the following data, calculate the YTM, YTC for year 3:

Settlement Date=	5/11/2011
Maturity Date=	5/11/2021
Coupon Rate=	7.000%
Current Market Price=	96.00
Redemption value at Maturity %=	100
Coupon Pmts per year=	2

Call Provision
Year	Call Price	Dates
Year 1 =	105	5/11/2012
Year 2 =	104	5/11/2013
Year 3 =	103	5/11/2014
Year 4 =	102	5/11/2015
Year 5 =	101	5/11/2016

Question 2- Given the following data, calculate the Price, Duration and Convexity of the Bond:

Face Value =	1,000
Coupon Rate=	8.000%
Discount Rate=	11.500%
Remaining Years to Maturity=	3
Redemption Price =	100
Redemption=	2

SECTION II - EQUITY ANALYSIS

Question 3- Prepare a DCF Analysis given the following assumptions:

Operating Assumptions (for years 1-5)
Revenue Growth		5.0%
Cost of Revenue as % of Revenue		60.0%
Oper. Expense as % of Revenue		10.0%
Depreciation Expense as % of Revenue		4.0%
Tax Rate		36.0%
Working Capital Expense		1.0%
Capex as % of Revenue		5.0%

SECTION III - OPTION ANALYSIS

Question 4- Calculate the Value of the Call Option using the Black Scholes Model and then the value of the Put Option using the Put Call Parity method

INPUT - CALL OPTION
Standard Deviation (σ) =		0.3
Expiration (in years) (T) =		1
Risk-Free Rate (Annual) (i) =		3.50%
Stock Price (S ) =		105
Exercise Price (X) =		110
Dividend Yield (annual) (δ) =		0

INPUT - PUT OPTION
Call Option Value	0.000
Expiration (in years) (T) =	1
Risk-Free Rate (Annual) (i) =	3.50%
Stock Price (S ) =	105
Exercise Price (X) =	110

Question 5- Calculate the Hedge Ratio and Value of the Option using the Bionomial Option Model applying the Hedge Ratio method (Not the Leverage or Borowing method)

Parameters	Current Stock Price	Increase / Decrease Factors (f) (u and d)	Stock x factor	Call Option Payoff if Exercised
Current Price=	$ 140.00
Up factor (u) =		1.25x
Down factor (d) =		0.85x
Range =

SECTION IV - FINANCIAL ANALYSIS

Question 6- Prepare the Cash Flow Statement and Ratio Analysis

Balance Sheet (000's)			Income Statement (000's)
	2009	2010		2009	2010
Current Assets			Revenues by Geography
Cash	67,500	86,100	U.S.	1,200,000	1,400,000
Accounts Receivable	67,500	87,000	Europe	180,000	210,000
Inventories	52,500	65,000	Asia	60,000	75,000
Prepaid Expenses	15,000	13,000	Total Revenue	1,440,000	1,685,000
Total Current Assets	202,500	251,100
			Cost of Revenues by Geography
Property and Equipment			U.S.	330,000	405,000
Land	3,750,000	3,750,000	Europe	150,000	172,500
Building	675,000	800,000	Asia	37,500	52,500
Furniture & Equipment	75,000	100,000	Total Cost of Revenue	517,500	630,000
Total Gross P&E	4,500,000	4,650,000
Less Accumulated Depreciaition	(450,000)	(550,000)	Gross Profit	922,500	1,055,000
Net P&E	4,050,000	4,100,000
			Operating Expenses
Long-Term Investments	300,000	400,000	Administrative & General	217,500	247,500
			Marketing Expenses	112,500	120,000
Total Assets	4,552,500	4,751,100	Other Operating Expenses	15,000	18,000
			Total Operating Expenses	345,000	385,500
Liabilities and Owners Equity
			EBITDA	577,500	669,500
Current Liabilities
Accounts Payable	52,500	65,000	Depreciation	90,000	100,000
Accrued Income Taxes	18,000	15,000
Accrued Expenses	15,000	10,000	EBIT	487,500	569,500
Current Portion of Long Term Debt	30,000	30,000
Total Current Liabilities	115,500	120,000	Interest Expense	144,000	136,000

Long-Term Debt:	1,800,000	1,700,000	EBT	343,500	433,500

Deferred Income Taxes	18,000	22,000	Taxes	137,400	173,400

Total Liabilties	1,933,500	1,842,000	Net Income	206,100	260,100

Owners' Equity
Common Stock	1,500,000	1,500,000
Paid-in-Capital	-	30,000
Retained Earnings	1,119,000	1,379,100
Total Owners' Equity	2,619,000	2,909,100

Total Liabilities & Owner's Equity	4,552,500	4,751,100

Attachment:- Exam.rar

Reference no: EM131067214

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