stuck probability exam z score and standard deviations
Please read the exam questions below.
In August 2017, Tesla Motors raised $1.8 billion in corporate bonds, priced at 5.3%, 8-year notes. The bonds were subordinated to more senior debt and received a B- rating from S&P and a B3 rating from Moody’s.
(1)Using the credit analytics discussed in our class, and traditional metrics, what does your group think should be Tesla’s bond rating before and just after the new bond issue?
(2)Would your answer change if the firm raised an additional $3 billion in bonds to meet production objectives?
(3)What is your estimate of the Bond Rating Equivalent (BRE) as of the most recent (Q1-2019) financials and latest (June 26, 2019) stock price?
(4)Given your answers #1 and #2 above, what are your expected cumulative PD (Probability of Default) and LGD (Loss Given Default) for Tesla for one-year and five(5) years?
(5)What are the bonds issued in 2017 now (June 26, 2019) selling at and what is the bond’s yield to maturity?
(6)Which of the two Z-Score models (Z or Zâ€) is most applicable to a firm like Tesla? Why? (7)What are the main differences between Z and Zâ€? List up to four differences.
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