A proposed corporate bond issue is usually subjected to a credit risk assessment by credit rating agencies. The results of such an assessment provide a basis for potential investors to make decisions regarding the proposal. Some investors consider duration to be a useful factor when deciding whether to invest in corporate bonds. However, other investors do not consider duration to be that useful and as such, they rely solely on the work of credit rating agencies. Such investors consider the information provided by credit rating agencies to be more useful than duration when choosing the bonds to invest in Required: Prepare a 2,000 word evaluative report that covers the following: (a) An identification and discussion of the factors that contribute to credit risk. [15 Marks] (b) Identification and discussion of how any two (2) approaches may be used to assess the degree of credit risk of a proposed bond issue. [10 Marks] (c) An explanation of how duration is estimated for an individual coupon paying bond and a critical discussion of the usefulness of duration as a measure of interest rate risk relating to corporate bonds. [15 Marks) (d) A discussion of whether there is a relationship between using duration and credit ratings when choosing bonds that an investor should invest in (10 Marks) [TOTAL: 50 MARKS] A Job has been completed at a total production cost of K3,633. Administration and selling overheads are applied at 20% of production cost. The selling price of each job is established so as to provide a GROSS profit margin of 30%. A proposed corporate bond issue is usually subjected to a credit risk assessment by credit rating agencies. The results of such an assessment provide a basis for potential investors to make decisions regarding the proposal. Some investors consider duration to be a useful factor when deciding whether to invest in corporate bonds. However, other investors do not consider duration to be that useful and as such, they rely solely on the work of credit rating agencies. Such investors consider the information provided by credit rating agencies to be more useful than duration when choosing the bonds to invest in Required: Prepare a 2,000 word evaluative report that covers the following: (a) An identification and discussion of the factors that contribute to credit risk. [15 Marks] (b) Identification and discussion of how any two (2) approaches may be used to assess the degree of credit risk of a proposed bond issue. [10 Marks] (c) An explanation of how duration is estimated for an individual coupon paying bond and a critical discussion of the usefulness of duration as a measure of interest rate risk relating to corporate bonds. [15 Marks) (d) A discussion of whether there is a relationship between using duration and credit ratings when choosing bonds that an investor should invest in (10 Marks) [TOTAL: 50 MARKS] A Job has been completed at a total production cost of K3,633. Administration and selling overheads are applied at 20% of production cost. The selling price of each job is established so as to provide a GROSS profit margin of 30%
