(a) Calculate the price and the bond equivalent yield (BEY) of a 29-week T-Bill quoted at...
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(a) Calculate the price and the bond equivalent yield (BEY) of a 29-week T-Bill quoted at an add-on yield of 1.5675%. (b) (5 marks) You purchased a 4.0% coupon corporate bond priced to yield 6.0% for settlement on November 25th, 2020. If the bond matures on 31st August 2026, calculate the full price and accrued interest on the settlement date. State any assumptions. (6 marks) (c) Snitch Ratings has published the following benchmark ratios for bond issues in an industry, based on 3-year averages over the period 2018-2020: Credit Ratings AA A BBB BB Operating margin 20.0% 18.0% 16.0% 14.0% Debt/EBITDA 0.4x 0.6x 0.8x 1.0x EBITDA/interest 17.0x 15.0x 13.0x 11.0x FCFE/debt 11.5% 11.0% 10.5% 10.0% Debt/Capital 10.0% 12.0% 16.0% 18.0% Lueseno Inc., a firm operating in the industry, has asked Snitch Ratings to assign a credit rating to its debt obligations for the first time. Lueseno's results for the past three years (2018-2020 inclusive) were as follows: Lueseno Operating margin 2018 2019 2020 18.8% 18.0% 17.6% EBITDA 5,677 5,925 5,054 Interest 352 382 361 FCFE 465 694 670 Debt 4,554 5,036 4,549 Equity 23,471 25,303 22,208 Based on the information provided, what credit rating do you believe Lueseno should receive? Explain your answer. State any assumptions. (19 marks) (a) Calculate the price and the bond equivalent yield (BEY) of a 29-week T-Bill quoted at an add-on yield of 1.5675%. (b) (5 marks) You purchased a 4.0% coupon corporate bond priced to yield 6.0% for settlement on November 25th, 2020. If the bond matures on 31st August 2026, calculate the full price and accrued interest on the settlement date. State any assumptions. (6 marks) (c) Snitch Ratings has published the following benchmark ratios for bond issues in an industry, based on 3-year averages over the period 2018-2020: Credit Ratings AA A BBB BB Operating margin 20.0% 18.0% 16.0% 14.0% Debt/EBITDA 0.4x 0.6x 0.8x 1.0x EBITDA/interest 17.0x 15.0x 13.0x 11.0x FCFE/debt 11.5% 11.0% 10.5% 10.0% Debt/Capital 10.0% 12.0% 16.0% 18.0% Lueseno Inc., a firm operating in the industry, has asked Snitch Ratings to assign a credit rating to its debt obligations for the first time. Lueseno's results for the past three years (2018-2020 inclusive) were as follows: Lueseno Operating margin 2018 2019 2020 18.8% 18.0% 17.6% EBITDA 5,677 5,925 5,054 Interest 352 382 361 FCFE 465 694 670 Debt 4,554 5,036 4,549 Equity 23,471 25,303 22,208 Based on the information provided, what credit rating do you believe Lueseno should receive? Explain your answer. State any assumptions. (19 marks)
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