MN30209 Investment Banking

This is an open book examination. You may refer to your own course and revision notes and look up information in offline or online resources, for example textbooks or online journals. However, you may not communicate with any person or persons about this assessment before the submission deadline unless explicitly permitted to do so in the instructions below. When you submit your assignment, you will be asked to agree to an academic integrity declaration and confirm the work is your own. MN30209 Investment Banking

The use of the work of others, and your own past work, must be referenced appropriately.  It is expected that you will have read and understood the Regulations for Students and your programme handbook, including the references to and penalties for unfair practices such as plagiarism, fabrication or falsification.

Q1. Phoenix Ventures has raised a £250 million fund with a duration of 10 years. Management fees are computed based on committed capital and are 2% per year in the first five years of the fund, then fall by 20 basis points per year in each of the subsequent years. The fees are paid quarterly in equal instalments.

a)Compute the total fees of the fund over its lifetime. Next, If the fund charges a 20% ‘carry’ on the total investment capital, and if the total cumulative distributions for 10 years is £300 million, how much would the fund managers earn?

Phoenix Ventures have identified Spring plc as a potential investment. Spring plc has 28 million common shares outstanding. The shares are trading at a price of £8.23. Spring holds £15 million in cash and has recently issued a 2-year bond with a face value of £100 million. The bond has a coupon rate of 6%, paid semi-annually. The yield-to-maturity is 4%