Economics Homework Help

Part A

Royal Caribbean Cruises Ltd -Cusip  RCL4568009

Evaluate the credit quality of the non-investment grade rated bond listed above. In your response, describe the following with respect to the non-investment grade rated bond:

Seniority ranking of the bond.

Capacity, as evidenced by the following ratios:

oEBITDA margin

oReturn on capital

oDebt/capital

oDebt/EBITDA

oFFO/debt

oFCF after dividends/debt

oEBITDA/interest expense

oEBIT/interest expense

Part A should have at least two scholarly or academic journal as references and have no less than 300 words.

Part B

Company

CUSIP

Coupon rate

Market price

Macaulay duration

Modified duration

Capital invested

# of bonds

Weighted Macaulay duration

Weighted modified duration

Schwab Charles

SCHW4836967

3.25%

110.36

7.02

6.96

$10,000

9.06

0.85

0.84

Exxon Mobil

XOM4218990

3.57%

108.46

16.32

16.07

$10,000

9.22

2.00

1.97

Apple

AAPL4208639

3.45%

111.77

16.54

13.32

$10,000

8.95

1.97

1.58

Royal Caribbean Cruises

RCL4568009

3.70%

95.98

5.88

5.75

$10,000

10.42

0.81

0.80

JP Morgan Chase

JPM4203227

3.13%

107.27

3.33

3.31

$10,000

9.32

0.41

0.41

Nike, Inc.

NKE4416427

2.375%

1.005%

7/14/2021

11/1/2026

2

5

4.97

Nike, Inc.

Intel

INTC4914060

3.25%

106.58

18.97

18.7

$10,000

9.38

2.37

2.33

Key Bk Natl Assn Ohio

KEY.KO

3.18%

102.06

5.69

5.62

$10,000

9.80

0.74

0.73

Totals

75.20

11.44

10.92

As the financial advisor at a money management firm, you have been asked to respond to a request from the client holding the bond portfolio above. The client has asked to include asset-backed securities in the portfolio. Select two asset-backed securities for consideration by the client and present them in your post. Your proposed two chosen asset-backed securities for consideration.

Include a chart (including Issuer name, if the asset backed securities are convertible or non-convertible, coupon, maturity date, Credit rating – S&P, Last price – sale, last price – yield, If the bond is callable, If the bond is puttable) with the main characteristics of the two chosen securities.

Your methodology for choosing the two securities.

State the bond that you will remove from the client’s portfolio in exchange for the asset-backed security. Explain your reasons for choosing this bond to remove.

Your expectations of how these asset-backed securities will perform in a rising interest rate environment and why.

oSpecifically relate this to the maturity effect, coupon effect, and/or duration of the chosen securities.