1. What are loan covenants? How do these compare to guarantees, pledges and warrants?
2. What are bond rating agencies? Provide an example. What type of risk are bond agencies most concerned with when they rate a company's bonds? Why? Finally, provide an example of an entity whose bonds are rated.
3. Tommy told Betty what he learned in finance class today. "Did you know, Betty, that the feature of a bond where the issuer can redeem the bond from the holder in exchange for the face amount plus, in most cases, a premium is called a 'sinking fund' provision". Betty said, "what are you talking about! That is called a repo provision!" What do you think? Who is right - Tommy or Betty? Or, are they both right? Or, are both of them wrong? If both of them are wrong, what is it that Tommy and Betty are describing?
4. Tim own shares of Good Dog Inc. Tim's friend Jennifer told Tim, "I heard that Good Dog Inc. is going to issue convertible bonds - at a price that doesn't seem much different from non-convertible bonds." When Tim heard this, he was mad. Jennifer, on the other hand, is a conservative investor who is very old and depends on a steady income. She was happy. Describe why Tim might be unhappy and Jennifer might be happy.

The table below shows various bond prices at different maturity levels for zero coupon bonds. Based on this information, how would you describe the shape of the yield curve - is it: flat, upward sloping, downward sloping or there is not enough information present to make a determination? What does this shape mean? Note that the bonds all have $1,000 face value.

Maturity 1 Price 950

2 900.70

3 860.38

4 820.27

The nominal rate of interest is 6% and the real rate of interest is 3%. What is the expected inflation rate?

Jennifer and Tim are going skiing. Jennifer says to Tim, "I hope the curve of the ski hill corresponds to the slope of the curve that exists between bond prices and yields." Tim looks puzzled and says, "I don't want to ski uphill." What do you think of Tim's comment?

1. JenniCo Inc. shares are trading for $500. Analysts expect the company to generate net income of $41.7 billion. JenniCo has 900 million shares outstanding. The average P/E ratio of JenniCo's competitors is 18. What is the fair price for a share of JenniCo?
2. Ivy Corp just paid out $1.7308B in dividends and repurchased $4.3983B worth of shares. Ivy has 1.12B shares outstanding. Ivy has told the market to expect total payouts to grow at an annual rate of 2%. Investors expect a 10% rate of return on Ivy shares. What is the Total Payout model estimate of the stock price today assuming that all payouts occur annually? (The next payout will occur in exactly one year.)
3. Assume that the industry average market-to-book ratio for the car industry is 3. Estimate the fair value of Madi Corp based on the industry average multiple and the data supplied below.

Data: Shares outstanding: 487,000,000; Equity: $9,087,000,000; Price: $75; Debt: $445,000,000

1. You are an investor considering the purchase of shares in Nanamobiles, a maker of specialty scooters. Shares of Nanmobiles are trading for $75 and its book value per share is $26.00. You have collected market-to-book information on Nanamobiles' main competitors; this is in the table below. What is the fair value of Nanamobile shares and should you buy them?

M/B Grandpa Motors 3.5 Pops' Scooter 2.4 Retired Roadmasters 3.0 Old Dog Enterprises 4.9

1. "All equity markets are efficient," Sarah said. "I disagree," said Chloe. "Large cap-markets are efficient - but small-cap markets are not," she continued. Olivia went further. "What about developing country markets. I think these are not efficient." What do you think? Is Sarah, Chloe or Olivia right? Or, are none of them right? Take a position and support it.