Treasury and Funds Management-AW (FN3540)

Practice Questions (TFC)

Question:
Mr. Ali is considering investing in a corporate’s TFC issue. The details of this issue is as follows:
TFC duration = 03 years
Grace period = 01 year
Principal redemption (%p.a.) = 50, 50
Par value = PKR 5,000/=
The interest rate of TFC is a combination of SBP discount rate (7%p.a.) + 3% p.a. (premium),
compounded semi-annually. Please draft the redemption schedule.

Question:
Let’s assume UBL wants to raise debt through a TFC issue. The details of this issue are as follows:
TFC duration = 10 years
Grace period = 2.5 years
Principal redemption (%p.a.) = Equal installments
Par value = PKR 150,000/=
The TFC coupon rate UBL offers is SBP discount rate (currently its 7%p.a.) + premium (3%p.a.)
compounded semi-annually. However, the floor and cap rates of this issue are 9.5%p.a. and
11.5%p.a. respectively. Please calculate the
• Base case redemption schedule
• Worst case redemption schedule

Question:
Ms. Heer wants to invest in ABC Co’s TFC issue. The details of TFC issue is as follows:
TFC duration = 5 years
Grace period = -
Principal redemption (%p.a.) = Equal installments
Par value = PKR 5,000/=
The TFC coupon rate follows a combination of SBP discount rate (currently its 7%p.a.) + premium
(4% p.a.) compounded semi-annually. However, its anticipated that the central bank policy rate is
going to decrease by 2%p.a. after 1 years. Calculate the TFC redemption schedule.

Question:
Let’s assume Packages wants to raise debt through a TFC issue. The details of this issue are as
follows:
TFC duration = 10 years
Grace period = 3 years
Principal redemption (%p.a.) = Equal installments
Par value = PKR 140,000/=
The TFC coupon rate Packages offers is SBP discount rate (currently its 7%p.a.) + premium (3%p.a.)
compounded semi-annually. However, the floor and cap rates of this issue are 7.5%p.a. and 9.5%p.a.
respectively. Please calculate the
• Base case redemption schedule
• Best case redemption schedule