Take Home Exam

Assignment Requirements

 

It is 4 questions, 3 of them are mainly writing, maybe a paragraph each question. and 1 calculation

I’ll upload 2 powerpoint slides to help guide you in answering the 3 questions
I’ll upload the exam, for the first question I already put the notes from the slides under the question, all what is needed is to explain each bullet a little bit further.

you can do more googling but no reference page is needed, just do your best paraphrasing .

please do your best with calculation question

assign me a finance expert please

(30% weight in the grade)

 

Type-written answers due on Thursday, June 5,2014 by midnight

 

 

1. Please explain why multilateral development banks such as the World Bank and the         African Development Bank all carry triple-A credit ratings despite the fact that 100% of   their loans are to poor developing countries. (20)

 

Strong capital base

Paid-in capital

Callable capital

Preferred creditor status

Ample liquidity

Consistent profitability

Conservative financial management

Hedging of foreign exchange risks

Positive cash flows for most LDCs

 

2. What are the similarities and differences between CDOs and CMOs? (20)

Investopedia +in the first class slides as well

 

 

3. Let us assume that Asian Development Bank (ADB) wants to securitize $500 million of   its loans (with the weighted average interest rate of LIBOR plus 185 basis points) in the   form of pay-through securities. Class A bonds account for 80% of the total bonds and     they are assigned AA rating and sold at LIBOR plus 40 basis points. Class B bonds         account for 15% of the total bonds and assigned BBB rating and sold at LIBOR plus 230 basis points. The rest, Class C bonds, are unrated and bought back by ADB. If we         assume all the $500 million ADB loans are paid back fully by its borrowers in Asia, what would be the return for ADB on its Class C bond investment? (20)

 

4.         Please explain the following terms in two paragraphs each (20 points each):

 

a. CLS System

 

b. European Central Bank (slides)

 

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