CRAB Rating Scale CRAB Long Term Rating Scale CRAB Short Term Rating Scale CRAB Long Term Rating Scale Rating Methodologies: It’s different for several sectors. Such as several methodologies for bank rating, financial institution rating, corporate rating, general insurance rating, life insurance rating, government owned enterprise rating and securitization rating. Other services: 1. Grading Services 2. Advisory & Consulting Services 3. Information Service
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Leverage Risk Leverage means that debt is combined with equity to purchase assets. A highly leveraged bank is a bank with high amounts of debt relative to equity capital. Because debt requires future payments for the issuer, a highly leveraged bank is less able to withstand unexpected shocks to its balance sheet. In short, a highly leveraged bank is more risky than a less leveraged one. The most straightforward measure of leverage risk is the ratio of equity capital to total assets, known as
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A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond’s coupon rate is 7.4%. What is the fair value of this bond? Solution: Coupon Payment = $1,000 × 3.7% = $37 ((10 years × 2) = 20 periods[pic] P = [pic][pic] = $481.29 + $414.64 = $895.94 Answer: $895.94 A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at
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(to ensure they sell) and involve direct flotation costs of $0.25 per share - has a total of $10,000,000 (par value) in debt outstanding. The debt is in the form of bonds with 10 years left to maturity. They pay annual coupons at a coupon rate of 11.3%. Currently, the bonds sell at 106% of par value. Flotation costs for new bonds would equal 6% of par value. The firm’s tax rate is 40%. What is the appropriate discount rate for the new project? Solution: Market value of common = 11.25(1000000)
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- The role of financial institutions and the different types of financial institutions Depository Institutions: 1. They offer deposit accounts that can accommodate the amount and liquidity characteristics desired by most surplus units 2. They repackage funds received and deposits to provide loans of the sie and maturity desired by deficit units 3. They accept the risk on loans provided 4. They have more expertise than individual surplus units in evaluating the creditworthiness
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Calculate Invoice price for bond maturing Nov. 15, 2012 (in Excel). Assume today’s date is 1/15/2009 2. Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 10%. 3. A) A zero-coupon bond with face value $1,000 and maturity of 6 years sells for $887.25. What is its yield to maturity? B) What will happen to its YTM if the price goes up to $899.99? 4. Why do bond prices go down when interest
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not be large for individual firms, they can provide additional sources of investment. * Many healthcare firms also have sizable funding requirements for defined-benefit pension plans and debt service requirements associated with the issuance of bonds. (Cleverley, Song & Cleverley). Cash management is tied together with the cash conversion cycle. This cycle “represents the time it takes a firm to go from an
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View online | Add Investopedia to safe senders list May 27, 2013 Dictionary Investing Markets Personal Finance Active Trading Forex Professionals Tutorials Bag Holder An informal investment term used to describe an investor who holds a position in a stock which decreases in value until it is worthless. Typically, the bag holder will hold the position for an extended period of time in which most of the investment is lost. Investopedia Says: ymbolically
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liability of the US due to the sale of securities (again, known as public debt) can be detrimental to the economy as it puts ever increasing pressure on the future generations to make good on the payments. For example, if you buy a 30-year Treasury bond today, the obligation to pay you in 30 years will fall on the taxpayers or investors of that time, many of whom have not even been born yet. For now government securities are one of the most secure investments one can make. They are considered secure
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very important for me to know and understand all of the different types of investment opportunities that are available in today’s markets. Coming into this class and this project, I was fairly uninformed about many of the common investments, such as bonds, options, and futures. The stock market was fairly familiar to me, but if I were asked to invest in stocks before participating in Stock-trak, the result would have been very unsuccessful. My original strategy was to invest a small amount of money
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