Question
2 ANSWER ALL QUESTIONS 1. You are the manager of United Caribbean Commercial Bank which has traditionally only accepted physical assets as collateral. The
2 ANSWER ALL QUESTIONS 1. You are the manager of United Caribbean Commercial Bank which has traditionally only accepted physical assets as collateral. The institution has now taken a decision to accept financial assets, such as shares, as collateral. Explain the peculiarities with using shares as collateral and provide a set of policy guidelines you would recommend in light of this decision. (10 marks) 2. You are the accountant at J&E Manufacturers and your CEO asks you to check if the company is at risk of facing liquidity problems. You examine the balance sheet extract below and calculate the current ratio which leads you to do further ratio analyses to identify if there is a problem. You will have to present your findings and general recommendations to the Senior Management Team. Provide the calculations of 2 liquidity ratios, analysis and recommendations you will make. (10 marks) J&E Manufacturers Balance Sheet (Extract) as at June 30, 2022 1st Quarter 2nd Quarter $ $ Current Assets Cash 12500 12200 Accounts Receivables 16550 16100 Inventories 32750 31900 Current Liabilities 30750 29900 3. The 1-year, 2-year, and 3-year spot rates for government bonds in Jamaica are 6.00, 7.10, and 8.00 respectively with corporate bonds having a spot rate of 8.00, 9.20, and 10.30 respectively. a) Calculate the implied forward rates for government bonds. (3 marks) b) Calculate the implied forward rates for corporate bonds. (3 marks) c) Calculate the marginal probability for each period. (3 marks) d) Calculate the cumulative probability of default. (1 mark) (10 marks total) CCNECTED TWO 3022122
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