User Account

All Pages

What is the bank estimate of the probability

Assignment Help Finance Basics
Reference no: EM132703589

The current on-year risk free rate is 6%. The rate charged on a one-year, $5,000,000 loan to XYZ Corp. is 10%. The bank estimates that in the event of default it can recover 80% of what it is owed.

a.)Based on this information, what is the bank's estimate of the probability that XYZ Corp. will default?

b.)If the bank changes its estimate of the probability of default so that it is 85% of what it was when it set the rate of 10%, what rate should it charge on the loan?

Reference no: EM132703589

Questions Cloud

What is the formal definition of justice : Dale and Mike Parak were twin brothers and best friends. They spent their entire lives looking out for each other's interests. While growing up, the two were.
Signal of improper revenue recognition : Perpetrators of improper revenue recognition schemes often attempt to offer the defense that recognizing future periods' revenue in the current period is only a
Prepare journal entry that bridgeport should record on dec : The interest rate used by the lessor in setting the payment schedule is 7%, Prepare the journal entries, that Bridgeport should record on December 31, 2020.
What is the beta of planned portfolio : What is the beta of your planned portfolio? Answer should include two digits to the right of the decimal point, rounded appropriately.
What is the bank estimate of the probability : Based on this information, what is the bank's estimate of the probability that XYZ Corp. will default?
Compute Appleton net US tax liability : Appleton paid U.K. income taxes of $500,000 on its branch income. Compute Appleton's net U.S. tax liability and any foreign tax credit carryover for 2018.
Where do most of the world hungry live : Where do most of the world's hungry live, and what are the major causes of hunger? What are some potential consequences and benefits to using biotechnologies.
What is profit at expiration : You then also hedge the position by selling the futures contract at $53. What is your profit at expiration if the stock price goes to $49?
Determine the current allowable charitable contribution : Determine the current allowable charitable contribution deduction in each of the following independent situations, and indicate the treatment

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the value of investment

You have finally saved $10,000 and are ready to make your first investment.

  What do you understand by credit bubbles

What do you understand by credit bubbles? Explain any four different instances through which credit bubbles manifest.

  Briefly describe your company and then benchmark the codes

1.briefly describe your company and then benchmark the codes of conduct used by similar companies in the industry.

  Direction of the effect by selecting

If a firm has retained earnings of $2.8 million, a common shares account of $4.8 million, and additional paid-in capital of $9.6 million, how would these accoun

  Private residence in pennsylvania

Suppose that you are a lender and that you have issued a loan on a private residence in Pennsylvania. The borrower has defaulted on this mortgage

  What was your dollar return and percent return

If you owned 330 shares of FedEx, what was your dollar return and percent return? (Round your percent return answer to 2 decimal places.)

  What will be the value of each of these bonds

The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year. a. What will be the value of each of these bonds when the going rate..

  Calculate the number of equal annual payments

Calculate the number of equal annual payments of £6000 that are required to supply a future value of £306528.05 immediately after the last payment is made.

  Make income statement under variable & traditional costing

The E-Corporation manufactures trendy, high-quality moderately valued watches that it sells on the Internet. As the corporation's senior financial analyst, you are asked to analyze the overall profitability fo the current year.

  Determining the after tax cost of debt

What is the after tax cost of debt on a $500,000 loan given a 7% interest rate and 35% tax bracket?

  Amount has the value of the firm been decreased

By what amount has the value of the firm been decreased by the expected bankruptcy costs? Assume there are no other claims on the firm.

  What are leadership practices

What are leadership practices that foster creativity and contribute to organizational innovation.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd