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新加坡商科类BUS308 Assignment代写,Credit and lending decisions课程代写

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中英银行目前对12个月的定期存款支付1.55%的年利率,并预计在12个月后能够以1.35%的成本吸引类似的资金。因此,它以高于预期资金成本1.0%的价格为一笔为期两年的固定贷款定价,每年支付利息5,500,000美元。在贷款发行的第二天,一年期和两年期政府债券的收益率(市场利率的指标)都下降了0.20%。…

 

Q1. A.

SBSC bank currently pays 1.55% p.a. on 12-month term deposits and expects to be able to attract similar funds in 12 months’ time at a cost of 1.35%. Accordingly, it has priced a fixed two-year loan of $5,500,000 at 1.0% over the expected cost of funds with interest paid annually. The day following the issue of the loan, the yield on both one- year and two-year maturity government bonds (indicators of market rates) decreased by 0.20% p.a.

b.

(ii) Suppose the interest rate at t = 1 is 8%. What will be ESG Prime Bank’s equity if it invests in the zero-coupon bond?

c.

Match Microsoft, Boeing, and Cathay Pacific to their respective 2019 Annual Reports. Provide justification for your selections.  No calculations are required.

Balance Sheet Structure Company A Company B Company C
(in percentage)      
Cash and securities 15 18 37
Accounts Receivable 10 4 18
Inventories 16 1 2
Other Current Assets 5 5 7
Fixed Assets 54 72 36
Total Assets 100 100 100
Short-term debt 1 1 0
Accounts payable 10 5 5
Accruals and others 42 17 33
Long-term debt 13 13 0
Other long-term liabilities 19 21 13
Owners’ equity 15 43 49
Total Liabilities & Owners’ Equity 100 100 100
Profitability Structure Company A Company B Company C
ROTA = EBIT/Total Assets  (%) 10 7 32
Margin  = EBIT/Sales (%) 9 10 39
Total asset turnover = Sales/Total assets 1.13 0.64 0.81
Leverage effect = Pretax ROE/ROTA 6.87 2.08 2.03
Pretax ROE = EBT/Owners’ Equity (%) 68 14 65
Tax effect = EAT/EBT = (1-Effective Tax Rate) 0.66 0.89 0.7
After Tax ROE = EAT/Owners’ Equity (%) 45 12 45

2(a)

The senior lending officer has provided you with the data below and you have to consider what analysis your wish to undertake. Please discuss pertinent questions that you would ask the senior lending officer before you commence the analysis and provide a rationale for the analyses you wish to undertake. Note: CF_TD (cash flow to total debt), NI_TA (net income to total assets), CA_CL (current assets to current liabilities), CA_NS (current assets to net sales) and F_OR_NF (fail or not fail).

CF_TD NI_TA CA_CL CA_NS F_OR_NF
-0.4485 -0.4106 1.0865 0.4526 1
-0.5633 2.0114 3.5134 0.1642 1
0.0643 0.0156 1.0077 0.3978 1
-0.1421 -0.0651 0.7066 0.2794 1
0.0351 0.0147 1.5046 0.7080 1
-0.0653 -0.5660 1.3737 0.4032 1
0.0724 -0.0076 1.3723 0.3361 1
0.0713 0.0205 1.3124 0.2497 1
0.0109 0.0011 2.1495 0.6969 1
-0.2777 -0.2316 1.1918 0.6601 1
0.1454 0.0500 1.8762 0.0000 1
0.0115 -0.0032 1.2602 0.6038 1
0.1227 0.1055 1.1434 0.1655 1
-0.2843 -0.2703 1.2722 0.5128 1
0.0777 -0.2316 1.1218 0.7601 1
0.5135 0.1001 2.4871 0.5368 0
0.0769 0.0195 2.0069 0.5304 0
0.3776 0.1075 3.2651 0.3548 0
0.1933 0.0473 2.2506 0.3309 0
0.1184 0.0499 2.5210 0.6925 0
-0.0173 0.0233 2.0538 0.3484 0
0.1703 0.0695 1.7973 0.5174 0
0.1460 0.0518 2.1692 0.5500 0
0.1398 -0.0312 0.4611 0.2643 0
0.1379 0.0728 2.6123 0.5151 0
0.1486 0.0564 2.2347 0.5563 0
0.1633 0.0486 2.3080 0.1978 0
0.5383 5.5000 0.4835 0.4835 0
-0.3330 -0.0854 3.0124 0.4730 0
0.5603 0.1112 4.2918 0.4443 0
0.2029 0.0792 1.9936 0.3018 0
0.1661 0.0351 2.4527 0.1370 0
0.5808 0.0371 5.0594 0.1268 0
0.1446 0.0524 2.2407 0.5403 0
-0.0103 0.0433 2.1538 0.3584 0

2(b)

Summarize the pros and cons of judgmental and empirically based credit evaluation systems. What would you recommend? Would your recommendation change if you were evaluating Singapore Airlines for a loan during the COVID-19 pandemic? No calculations are required but your answer must relate to the Statement of Financial Position presented.

3(a)

A company has a choice between a bullet loan and an equivalent amortized loan with a value of $3,500,000. Calculate the repayment cash flows for a four-year loan with 3.15% pa fixed interest rate bullet loan and the equivalent amortized loan.

Year Bullet loan repayments Amortized loan repayments
  3.15% 2.35% 3.15% 2.35%
1 ?   ?  
2 ?   ?  
3 ?   ?  
4 ?   ?  

Based on your calculations for the bullet loan repayments and amortized loan repayments, explain why the bank recommends that the amortized loan be taken. If interest rates fell to 2.35% fixed rate, would that alter the bank’s recommendation?

3(b)

The accounts of 4,500 credit card customers out of a sample of 40,000 that were reviewed did not perform satisfactorily. The credit scores assigned to these applicants when originally assessed had a mean of 70 and standard deviation of 8. The scores of the remaining customers had a mean of 87 and a standard deviation of 12. Assuming these distributions are approximately normal, if the cut-off score was revised upward to 82.

  Creditworthiness
High Low
Mean credit score 87 70
Standard deviation of credit score 12 8
Probability of receiving credit (%)    
Probability of being denied credit (%)    

(ii) The original default rate on the sample of 40,000 card holders was extremely high. What impact would be setting the cut-off at 82 have on the default rate? Show calculations. Is this adjustment reasonable? Discuss.

(iii) Based on the credit evaluation process. Complete the following table and identify the Type I and Type II errors. All quadrants need to be identified.

Analysed credit quality   Actual credit quality

 

Good

 

Bad
 

Good

   
 

Bad

   

4(a)

Before Neo Goh Hian Distributors approaches the bank for a loan the company has asked their internal credit department to see if the firm can generate any internal funds.

What conclusions can you draw from your analysis?

What supplementary quantitative information is necessary to increase your confidence in your analysis?

Neo Goh Hian Distributors
Balance Sheet
as at
  31-Dec-17 31-Dec-18 31-Dec-19
Assets            
Current Assets            
Cash   6   12   8
Accounts receivables   44   48   56
Inventories   52   57   72
Prepaid expenses   2   2   1
Total Current Assets   104   119   137
Non-current Assets            
Property, Land & Equipment 90   90   93  
Less Accumulated Depreciation 34   39   40  
Total Non-current Assets   56   51   53
Total Assets   160   170   190
Liabilities and Owners’ Equity            
Current Liabilities            
Short-term debt   15   22   23
Bank 7   14   15  
Current portion of Long-term Debt 8   8   8  
Accounts payable   37   40   48
Accrued expenses   2   4   4
Total Current Liabilities   54   66   75
Non-current Liabilities            
Long-term debt   42   34   38
Total non- current liabilities   42   34   38
Owners’ Equity   64   70   77
Total Liabilities and Owners’ Equity   160   170   190

4 (b)

How would your focus change if we were considering the COVID-19 crisis period?

5.

Examine pages 118 and 119 of the 2020 Annual Report for OCBC Bank reproduced below and consider how the five C’s discussed in the course have application in the present coronavirus pandemic. Discuss if and how the ranking of the 5Cs change depending on whether you are considering “Consumers and Small Business”, “Corporate and Institutional Customers” or “Private Lending Customers”.

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