The writer is very fast, professional and responded to the review request fast also. Thank you.
Reverse Exchangeable Securities (RES) issued by ABN AMRO bank are traded on the
American Stock Exchange (AMEX). RES are a hybrid instrument and have a payoff that
consists of a fixed amount and/or a payoff that is indexed to the performance of a highly
liquid stock.
Consider the RES that is described in the attached prospectus. The RES matures in one and
a half years (the exact issue and maturity dates are given in the prospectus). The RES pays
a coupon of 12%.
The payoff on the RES is determined by the value of 38.88 (let this be denoted by N) shares
of Dell. If the price of Dell stock is greater than $25.72 (let this be denoted by K), then the
final maturity value is equal to $1,000. If the price of Dell stock is less than $25.72, the final
payoff is equal to 38.88 *Dell’s Price/share, i.e. the bond is exchanged for 38.88 (N) shares.
Note that the number of shares of Dell multiplied by the benchmark price for Dell that
triggers the differential payoff is equal to $1,000, (i.e. N*K = 1,000).
The RES is sold to investors for a price of $1,000. Based on your analysis in Part (b)
is the security overpriced or is it underpriced? Discuss why the security is
mispriced (if at all) and your calculations.
Show more
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more