Question 1 (60 marks): 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 company's 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 07December 2023; 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: 07 December 2020 Pricing Date: 07December 2020 Valuation dates: the 5th Business day of each calendar month Maturity date: 07December2023 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 07December2020; 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; Question 1 (60 marks): 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 company's 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 07December 2023; 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: 07 December 2020 Pricing Date: 07December 2020 Valuation dates: the 5th Business day of each calendar month Maturity date: 07December2023 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 07December2020; 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
