Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Q 9 HSU just issued US$ 2 0 0 million 1 0 year bond at PAR with an annual coupon of 2 % attached with
Q HSU just issued US$ million year bond at PAR with an annual coupon of attached with a year warrants on HSU shares. Each bond has a US$ denomination and has detachable warrants. warrant allows bondholder to purchase one HSU share at an exercise price of US Currently the HSU share is quoted at US$ and the Yield to Maturity YTM of a similar fixed coupon bond issued by HSU is a If the market has a standard that if a warrant has a premium greater than the warrant is then expensive. Given the issuance terms, would you recommend investors to buy this issue? Hint: Calculate the $ value per warrant to evaluation the warrant premium in Topic a follow the bond cum warrant example. Dont just calculate the warrant premium and not make investment recommendation.b At the same time as a HSU also issued a Convertible Bond CB with a zero coupon with a Conversion Price that gives the Conversion Premium the same Warrant Premium as Bond cum Warrant in a If investors have an extremely bullish view on HSU over the next years, what would you recommend to investors between this CB and the Bond with Warrants described in a Explain the rationale between your recommendation. Topic a&b what is the major difference between CB and Bond cum warrant in terms of equity exposure?c HSU is considered issuing a callable fixed coupon bond. The issuing terms are year maturity with annual coupon callable at year and every year thereafter at a Call Price of $ The issue price is at PAR with the yield to maturity YTM is A similar year government bond yields If the call option part of this Callable Bond is valued at The market has a comparable non callable fixed coupon bond by another issuer EAF that has a YTM Can you review the attractiveness of HSU callable bonds credit or yield spread comparing with the EAF bond? Hint: Analyse the Call Adjusted Yield spread CAS to assess. Revise the example in Topic a on CAS on callable bond
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started