Chrome File Edit View History Bookmarks People Tab Window Help 100% 77 Fri 7:43 PM Q Why [ x * FNCE X 1 FNCE X D. Table X C Tab W X CWOCX C Chege x + M Inbox x M Your x Subje x L12_SX FNCE X X L9_rex C File /Users/yashmendiratta/Downloads/ENCE90011%202020SM2%20-%20SE.pdf Update Apos M Gmail Maps G Google 2 Home Prime Video All your designs -... CFA Institute FNCE90011 2020SM2 - SE.pdf 5 / 7 + Question 1.54+4-6 = 14 marks; 20 minutes] The value of the assets awned by Catfish ind follows a lagrormal distribution. The current firm value $ $100. The firm is about to issue a zero-coupon bond with a face value of $60. The volatility of the firm's assets is 30% annualized, and the continuously-compounded risk-free rate equals 10% per annurn. lal if the band has a maturity of 1 year, what are the current prices of the Catfish bond and of a default-free bond with the same characteristis? if the value of the assets of Catfish would increase by $0.5 over the next second, by how much would the value of the bond change aparoximately? The treasurer of Catfish Ltd is considering his options (no pun intended) and examines a range of different maturitics for the band. His assistant has created the following graph showing the credit spread for a zero-coupon bond as a function of its maturity. c) The treasurer asks you for advice to understand the graph. In your response, address the following questions: What drives the increase in credit spread as the maturity increases with short maturities? What drives the decrease in credit spreads as the maturity keeps on rising? AN G 18 ity . X A Chrome File Edit View History Bookmarks People Tab Window Help 100% 77 Fri 7:43 PM Q Why [ x * FNCE X 1 FNCE X D. Table X C Tab W X CWOCX C Chege x + M Inbox x M Your x Subje x L12_SX FNCE X X L9_rex C File /Users/yashmendiratta/Downloads/ENCE90011%202020SM2%20-%20SE.pdf Update Apos M Gmail Maps G Google 2 Home Prime Video All your designs -... CFA Institute FNCE90011 2020SM2 - SE.pdf 5 / 7 + Question 1.54+4-6 = 14 marks; 20 minutes] The value of the assets awned by Catfish ind follows a lagrormal distribution. The current firm value $ $100. The firm is about to issue a zero-coupon bond with a face value of $60. The volatility of the firm's assets is 30% annualized, and the continuously-compounded risk-free rate equals 10% per annurn. lal if the band has a maturity of 1 year, what are the current prices of the Catfish bond and of a default-free bond with the same characteristis? if the value of the assets of Catfish would increase by $0.5 over the next second, by how much would the value of the bond change aparoximately? The treasurer of Catfish Ltd is considering his options (no pun intended) and examines a range of different maturitics for the band. His assistant has created the following graph showing the credit spread for a zero-coupon bond as a function of its maturity. c) The treasurer asks you for advice to understand the graph. In your response, address the following questions: What drives the increase in credit spread as the maturity increases with short maturities? What drives the decrease in credit spreads as the maturity keeps on rising? AN G 18 ity . X A
