UNIVERSIDAD DEL PACFICO

Finanzas Corporativas 2016-II

Profesor: Samuel Mongrut

( A ) Brbara Falcn / Renzo Morales

( B ) Luca Lastarria / Katherine Tejada

Fixed income (5 points)

1. (2 points) Sovereign debt.
a) Analyze Peru 33 and Peru 50 bond (International bonds - USD)
a. Calculate YTM and Z-spread (YAS)
b. Evaluate z-spread between Peru 33 and Peru 50. Then, elaborate an investment thesis.
c. Is there an advantage of this investment thesis in comparison to evaluating the Z-spread
of 2 different corporate bonds with different issuers? And in comparison with
evaluating 2 global bonds issued by different countries?
b) Compare the following Peruvian bonds: PeruGB 26 (PEN), COFIDE 25 and BCP 27
i.
Explain the similarities and differences between these bonds and how these affect the
YTMs and Z-spreads. Compare G-spreads, I-spreads and Z-spreads.
2. (3 points) You work at a very important family office multinational firm as an investment
analyst in the fixed-income divisin. Since investors risk appetite has been increasing, you
have been asked to construct portfolios made of LATAM bonds. You have been given the
following tasks:
a) Construct a fixed-income portfolio with the following characteristics
o Corporate bonds
o Currency: USD
o Countries:
Peru,
Mexico,
o Only investment grade bonds according to
Colombia, Chile and Argentina
Fitch and Moodys
o Industry:
financials
and
o Maturity: mximum of 50 years
subfinancials
o Maturity type: exclude putable and
o Coupon rate: greater or equal
sinkable
than 1, but less or equal than 8.5
o Any amount standing
b) There are 3 types of investors: 1) Domestic investors in each country that due to transaction
costs prefer to invest only in domestic bonds and want equally-weighted portfolios, 2)
Middle-aged people with an investment horizon of 7 years, 3) Elder people that plan to
withdraw the money in 3 years. Construct portfolios for each type of investor.
c) Compare sovereign yield curve of Peru and United States of the last 2-months
o Analyze KRDs
o Explain with the most relevant news why the curves have moved that way. Consider
news about bond issuance, monetary policy decisions, macroeconomic data, and
others. (Hint: analyze intervals of one week.

Equity valuation (15 points):

One of the most coveted annual auctions on eBay is a lunch with billionaire Warren Buffett. And many
are willing to pay hundreds of thousands and even millions to spend time and learn from this successful
businessman. And what does Mr. Buffet for someone willing to give a fortune to share a meal with him?

Better known as the Oracle of Omaha, Warren Buffet is known as one of the most successful investors in
the securities field. Under the guidance of their teacher, Benjamin Graham, he has accumulated a fortune
based solely on investing in stocks and buying companies through his company Berkshire Hathaway.
Shareholders who invested 10 thousand in Berkshire Hathaway in 1965 have an equity value worth 50
million dollars now. Many want to learn something of the wisdom investor Warren Buffett. He has
achieved returns on their investments are always a matter of discussion because they have been high
and very consistent over the years. In fact the actions of Bershire Hathaway, Buffett s investment
company had an annual return of 19% between 1965 and 2012 (47 years) which compares with 9.5% in
the same period stock index S & P 500, which includes the top 500 US companies. And how he does it?
Warren Buffet has its own investment style. This investment system is known as value investing. In short,
this means is that Buffet selects companies that have real ability to generate future income and calculates
its value based on these projected future earnings.
3. (3 points) Can you replicate Warren? Present us 4 slides with your stock portfolio proposal,
screening methodology and conclusions. Attach excel with calculations. The shorter, the
better. Best sharpe ratios will be rewarded.
4. (2 points) Do you know this technical analysis tools and graphs: Flags and pennant; Bolliger
bands and RSI? Propose us a buy strategy for any stock you choose. If you find the three of
them in one stock, great!
5. (10 points) Perform a fundamental valuation for your company using the FCFE model.
Comments on every spreadsheet describing your assumptions would help. Comments on your
values and sensitivity analysis will be rewarded.
No pain no gain The TAs

UNIVERSIDAD DEL PACFICO

Finanzas Corporativas 2016-II
Profesor: Samuel Mongrut

( A ) Brbara Falcn / Renzo Morales

( B ) Luca Lastarria / Katherine Tejada