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The bank is considering approving a special loan with the following characteristics: Loan A: The loan that has 5 years to maturity and has bond-like repayments. Loan B: The loan has repayments of $145.808 million at the end of year 1, $603.695 million at the end of year 4, and $33.755 million at the end of year 6. Both loans are trading at par and the yield to maturity is 5.5 percent per annum. Select the loan that the bank should approve. Please provide justification. Assume that both loans have similar default risks. Assuming a flat yield curve and a parallel shift of the entire yield curve of 150-basis points upward what the impact on the FI’s market value of equity is? QUESTION 1b Calculate the convexity for a three-year 5.5% coupon rate with a face value of $500,000 loan with amortized payments. Use this information
FIN3101A/FIN3701A: Corporate Finance QUESTION 1 a Use this balance sheet information to answer the following questions: Financial Institution (FI) Balance Sheet (Amount in millions,…