Define the type of bond instrument, Financial Management

Assignment Help:

You are an investment banker advising a Eurobank with reference to a new international bond offering it is considering.  The carries on are to be employed to fund Eurodollar loans to bank clients.  What sort of bond instrument would you recommend that the bank consider issuing?  Why?

Answer:  As the Eurobank desires to use the bond carries on to finance Eurodollar loans that are floating-rate loans, the investment banker should propose that the bank issue FRNs, which are a variable rate instrument.  So there will a correspondence among the interest rate the bank pays for funds and the interest rate it receives from its loans.  For instance, if the bank often makes term loans at indexed to 3-month LIBOR, it might wish to issue FRNs, as well indexed to 3-month LIBOR.


Related Discussions:- Define the type of bond instrument

Explain the fixed and floating rates, Question 1 Globalization is a pro...

Question 1 Globalization is a process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspe

Dual aspect concept - accounting principle, Dual Aspect Concept - Accountin...

Dual Aspect Concept - Accounting Principle This is, no doubt, the basic concept in accounting.  Under this concept, each transaction has got a two-fold aspect: (i) yielding

Calculated betas provide different information, Calculated betas provide di...

Calculated betas provide different information if they are obtained by using daily, weekly or monthly data. Which data is the most appropriate? Fernández and Carabias (2007) an

What is a hedge fund, Q.What is a Hedge Fund? A Hedge Fund is a fund es...

Q.What is a Hedge Fund? A Hedge Fund is a fund established by one or else several partners with net worth of at least $1 million (although this maybe falling). It uses long as

Beta, what is the value of beta for this fund ? If the benchmark index for ...

what is the value of beta for this fund ? If the benchmark index for this mutual fund increased by 11.00% during the period covered by beta measure, what was the rate of return for

Sophisticated methods of mortgage backed security valuation, MBS ...

MBS are the most complicated securities that are sensitive to interest rates. The factors that affect the price of MBS are varied and most of th

Is book value the best proxy to the value of the shares, Is book value the ...

Is book value the best proxy to the value of the shares? No. According to A6 it would be a miracle if the number that appears in the Shareholders' Equity had anything to do wit

Strategic management, Develop and implement strategic plan using bounce fit...

Develop and implement strategic plan using bounce fitness as case study

Mortgage pass-through securities, The basic form of a mortgage back...

The basic form of a mortgage backed security is that of a mortgage pass-through security. Among the mortgage-related securities, the mortgage pass-through s

Define the covered arbitrage process and arbitrage profit, Assume that the ...

Assume that the current spot exchange rate is FF6.25/$ and the 3 month forward exchange rate is FF6.28/$. The 3 month interest rate is 5.6% per year in the U.S. and 8.8% per year i

Write Your Message!

Captcha
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!

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