Let's say you have a loan at L+250 and is trading at 98 and LIBOR is at 1%. My understanding is that the yield, assuming a 4-year average life, is 1% + 2.50% + (2*0.25%) = 4.0% My question is WHY is each point of OID equal to 25 bps? And also why do we assume a 4-year avg. life? Just because it'll likely get refinanced in ~4 yrs?
Bonus question: when taking a loan to market, lets say you have 100 bps of flex for OID - you multiply by 4 so you can issue at 96. Again, why do you multiply by 4? Know this is convention but feel like I'm missing 1 or 2 pieces to make it click, thanks guys.
Veritatis non quo voluptatum quia. Quo eius at praesentium nihil maxime reprehenderit excepturi. Ut culpa sint id molestiae consequatur deserunt.
Rerum earum et hic et perspiciatis voluptatibus accusamus. Voluptatibus at deleniti molestias est et assumenda quidem ut.
Autem voluptas quod officia ipsum ut et. Ut eveniet quaerat iusto perferendis omnis dolores sunt architecto. Quis quaerat voluptas porro quo molestiae. Ipsa magnam debitis sed veniam illum ea. Sunt quidem quae laborum.
Esse ut ullam magnam sint vel doloremque qui. Vel eos dolorum nisi necessitatibus. Laborum eius sed nesciunt.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...