II. SPECIAL PURPOSE VEHICLES and recent US TREASURY / FEDERAL RESERVE PROGRAMS Assume as part of the SMCCF (Secondary Market Corporate Credit Facility), the US Treasury contributes $25 billion to the SMCCF Special Purpose Vehicle. 1. If the Fed decides to purchase investment grade bonds and applies 10x leverage to the $25 billion in equity, what amount of investment grade bonds can the Fed buy? 2. If the Fed decides to purchase non-investment grade bonds (high yield) and applies 3x leverage to the $25 billion in equity... a. What amount of non-investment grade bonds can the Fed buy? b. Draw a diagram with three parts 1) US Treasury contribution and (b) Fed contribution [THE INPUTS 2) The SPV (TAKES CASH IN, BUYS SECURITIES 3) The securities that could be purchased [THE OUTPUTS] II. SPECIAL PURPOSE VEHICLES and recent US TREASURY / FEDERAL RESERVE PROGRAMS Assume as part of the SMCCF (Secondary Market Corporate Credit Facility), the US Treasury contributes $25 billion to the SMCCF Special Purpose Vehicle. 1. If the Fed decides to purchase investment grade bonds and applies 10x leverage to the $25 billion in equity, what amount of investment grade bonds can the Fed buy? 2. If the Fed decides to purchase non-investment grade bonds (high yield) and applies 3x leverage to the $25 billion in equity... a. What amount of non-investment grade bonds can the Fed buy? b. Draw a diagram with three parts 1) US Treasury contribution and (b) Fed contribution [THE INPUTS 2) The SPV (TAKES CASH IN, BUYS SECURITIES 3) The securities that could be purchased [THE OUTPUTS]