2 points) 6. A feature in the high yield market that allows the issuer to pay in

Question

2 points) 6. A feature in the high yield market that allows the issuer to pay interest in the form of additional notes is called a: a. Bridge loan b. First lien c. PIK d. Term B loan 7. What is the annual interest rate paid on a debt obligation's principal amount outstanding (2 points) called? a. Covenant b. Coupon c. Call premium d. PIK 8. When performing a returns analysis in an LBO, which method DOES NOTinclude the time value of money? (2 points) a. IRR b. DCF c. Cash return analysis d. Present value method 9. If an L.BO target does not repay any debt during the investment horizon, how can the sponsor still realize a return? 2 points) If the target reinvests its cash into the business, the sponsor can realize a return by selling the target at a higher enterprise value a. b. The sponsor cannot realize a return, as the enterprise value did not increase The sponsor cannot realize a return, as the value of the sponsor's equity could not c. increase d. It depends on the sponsor's internal rate of return 1 0 Which strategy provides he sponsor with the ability to retain 100% of its existing ownership position in the target? oints a. Sale to a strategic buyer b. IPO c. Dividend recapitalization d. Private sale BFIN 7225-Final Exam - Fall 2017 20171030.docx Page 2 of 10

Explanation / Answer

6.

A feature in the high yield market that allows the issuer to pay interest in form of additional note is called a Paid In-Kind Note (PIK)

Option (C) is correct answer.

7.

On Bond, the issuer pay interest rate in term of coupon rate. Coupon rate is annual interest rate paid on debt obligation’s principle amount outstanding.

Option (B) is correct answer.

8.

When performing a return analysis in a LBO, DCF method does not include the time value of money.

Option (B) is correct answer.

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