Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please read the following case study, think from Financial Management perspectives and broadly cover what we discussed in the class and structure your short answers

Please read the following case study, think from Financial Management perspectives and broadly cover what we discussed in the class and structure your short answers in below format;

A) Please list your expected return for the following investment in different scenarios;
B) Please list the risks and discuss the impacts;
C) Why you go ahead with that investment by listing your recommendations;

Case Scenario: If you are a CFO who is responsible for your companys investment. World leading C Bank relationship manager came to you and offered you the following investment product; some key features are illustrated in below:

Auto callable Contingent Coupon Equity Linked Securities Linked to an Equally Weighted Basket of Four Underlying Due 31March2025;

Issuer: C Bank Group Global Markets Holding Inc.

Guarantee: All payments due on the securities are fully and unconditionally guaranteed by C Bank Group which is AAA Grade rating;

Underlying Company Stock

Weight

Advanced Micro Devices, Inc

25%

Square, Inc

25%

Tesla, Inc

25%

Zoom Video Communications, Inc

25%

Stated Principal amount: $1,000 per security;

Issue Date: 31March2021

Pricing Date: 31March2021

Valuation dates: the 5th Business day of each calendar month

Maturity date: 31March2025 unless earlier redeemed

Coupon Payment: Monthly Dividend at 0.8333% p.m. roughly 10% unless the market value of any underlying company stock is not below 60% of the initial pricing as of 31March2021;

Payment at Maturity: If the securities are not automatically redeemed prior to maturity, callable when any of underlying stock price is below 60% of the initial pricing; If that is the case, your principal payment will be 60% of the initial purchase price + any of previous paid coupon;

Otherwise, your return will be the ending sales price previous coupon payment- management fee as of 2%; However capped at 20% capital gain;

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Reporting Standards An Introduction

Authors: Belverd E. Needles, Marian Powers

3rd Edition

1133187943, 978-1133187943

More Books

Students also viewed these Finance questions

Question

What is the major product from this reaction? Compound 1 A B C

Answered: 1 week ago

Question

1. Explain the purpose of a business plan.

Answered: 1 week ago