Question 1 only

Read Attachment 3D. - This case study is an example of how the International Finance Corporation (IFC) which is an arm of the World Bank works with private banks to provide loans to extremely poor individuals in developing countries (who would otherwise not have access to finance). In this case the IFC is working with Nib International Bank to provide loans to coffee farmers in Ethiopia. The IFC andNib entered into a risk-sharing agreement whereby the IFC has set up a $ 10m facility to cover any loses up to 75% of loans made by No to farming cooperatives.- -To date, there have been 62 loans made to cooperatives benefiting more than 45,000 farmers. 1.-Is this a cash or synthetic transaction? Is the transaction, fully, partially or un-funded?- 2,' What type of 1nstrument can be used to structure such a risk-sharing facility? 3.+Draw and label adiagram of the flow of funds, return and risk between the ultimate user of funds, Nib and the IFC. 4.The details of the facility are not clear. In particular, we cannot tell ifthe IFC guarantee is 75% per loan or 75% of the loan portfolio. For the purposes of this question, assume that Nib has made 60-loans valued at S200,000 each. Consider the following scenarios (1) 60 loans lose 75%; and (2) 45 loans lose 100% a.- Calculate the loss to the loan book under each case in the absence of the guarantee b.. . Calculate the loss under each case to Nib ifthe IFC guarantee was 75% per loan- c:+ Calculate the loss under each case to Nib if the IFC guarantee was 75% of the loan portfoliov d.- Which scheme does Nib prefer?v e-Suppose the guarantee is 75% of the loan portfolio and suppose 0% of the loans Nib has made thus far have defaulted. The facility is nearing maturity. If you were the CEO of Nib, what could you do to extract as much benefit from the facility as possible in the remaining time