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Need help with this... Struggling to understand the part 1 and 3 QUESTION 1 a) Consider the following information: ('8m) Working capital Total assets Earnings
Need help with this... Struggling to understand the part 1 and 3
QUESTION 1 a) Consider the following information: ('8m) Working capital Total assets Earnings before interest and taxes Sales Market value of equity Total liabilities Retained earnings 5 530 7 880 2,500 300 50 i) With appropriate workings, compute the Altman's Z score. From your answer, explain the result in particular, addressing the expected yield for the debtholders (low, medium, high). (25 marks) ii) Discuss the appropriateness of the Altman Z-Score across various types of firms (5 marks) b) Consider a portfolio with annual returns which are normally distributed and standard deviation of 15%. The current value of the portfolio is $300 million. Using a 360 day count for 1 year, determine: i. ii. iii. iv. The 1-day 95% VaR for this portfolio? The 7-day 95% VaR? The 1-day 99% VaR for this portfolio? The 10-day 99% VaR? (20 marks) [Total 50 marks] QUESTION 1 a) Consider the following information: ('8m) Working capital Total assets Earnings before interest and taxes Sales Market value of equity Total liabilities Retained earnings 5 530 7 880 2,500 300 50 i) With appropriate workings, compute the Altman's Z score. From your answer, explain the result in particular, addressing the expected yield for the debtholders (low, medium, high). (25 marks) ii) Discuss the appropriateness of the Altman Z-Score across various types of firms (5 marks) b) Consider a portfolio with annual returns which are normally distributed and standard deviation of 15%. The current value of the portfolio is $300 million. Using a 360 day count for 1 year, determine: i. ii. iii. iv. The 1-day 95% VaR for this portfolio? The 7-day 95% VaR? The 1-day 99% VaR for this portfolio? The 10-day 99% VaR? (20 marks) [Total 50 marks]Step by Step Solution
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