MC – Cat Bonds (catastrophe bonds)
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
When insurance companies issue Cat bonds, who do they share their risks with?
When insurance companies issue Cat bonds, who do they share their risks with?
Given the promised coupon, the principal amount the probability of default, and the payment under default, determine the expected payment from the bond.
Your numbers will vary.
When a firm sells an asset, in this case, an office building, but then leases the asset back in order to use it, this is called a what?
Determine the minimum acceptable lease payment for a lessor given that a computer will be depreciated straight-line to a zero salvage value. The problem assumes that the years over which the asset is depreciated is one less than the number of lease payments: for example 5 years of depreciation, but 6 lease payments.
Your numbers will vary.
What is the most important difference between a corporate bond and a Treasury bond issued by the U.S. Treasury?
Your firm will lease a magic box. You are given the cost of purchasing the box upfront, the lease payments, the borrowing rate, and the marginal tax rate, determine the NPV of the lease.
Your numbers will vary.
Given the lease payments for a new copier, the cost to buy it, and provided that it is depreciated straight line to a zero salvage, determine the NPV of the lease.
Your numbers will vary.
What does the seller of a forward contract agree to do?
Given the annual lease payments and the tax rate, determine the annual tax shield from the lease payments.
Your numbers will vary.
Concept only: The value of a bond = ______ – ___________. You are given asset value, call option on assets, default-free bond, and value of put option on assets. What are words that would fit into the above?