In rising interest rate environment, what will be the impact on highly leveraged companies? Evaluate the same in context of Credit Risk?
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In rising interest rate environment, what will be the impact on highly leveraged companies? Evaluate the same in context of Credit Risk?
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- Suggest what is the best financial instrument to offset market risk exposure and from market volatility? WHY?Should a firm use debt instruments as a financing option, what are its effects on the firm’s expected return and risk?What is behavioral finance? What are the implications of behavioral finance formarket efficiency?
- How does a bank try to achieve the best possible risk adjusted return on its overall loan portfolio?What is duration gap model? Explain the concept of duration. How duration measure can be used to protect a financial intermediary against interest rate risk?Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity? How should the capital structure weights are used to calculate the WACC be determined?
- What is the difference between lending and borrowed portfolio. How leverage can increase the returns. Give practical calculations with relevant example. Explain BrieflyIn what way does leverage increase the riskiness of a loan?discuss the advantages and disadvantages of options in the financial market
- Is it correct to state that banks’ returns will be higher if interest rates increase? Outline the advantages and drawbacks of Gap analysis and Duration analysis.What is interest rate risk? Elaborate with example. Explain in detail that how managers of financial institutions manage interest rate risk on Balance sheet.Behavioral finance is an area of study focused on how psychological influences can affect market outcomes. Discuss