Question

if you were an investor who is looking for a bond to invest to are you going to buy a bond that you chose (NVIDIA corp)

1.describe the main elements of the bond :coupon rate and coupon payment ,maturity ,rating.

2.take a look at the balance sheet and income statement of the company(NVIDIA CORP) .what data or ratios support your decision to buy this bond or not?you should develop a specific recommendation with supporting rationale to explain your answer

Answer 1

1]

The bond chosen is below :

coupon rate is 2.850%

coupon payment = semiannual

Maturity date is 04/01/2030

Rating is A3 (Moody's) and A- (S&P)

YTM is 1.497%

The bond is callable at anytime after 01/01/2030 at a call price of $100.

2]

It is recommended to buy the bond based on a credit analysis of NVIDIA CORP.

Debt-to-total assets ratio = total debt / total assets = $1,991 million / $17,315 million = 11.50%. This ratio shows that the company has low financial leverage, and therefore has relatively low financial risk. Its debt as a percentage of total asset is low, which reduces the risk for debtholders of the company.

Times interest earned = operating income / interest expense = $2,846 million / $126 million = 22.59. This ratio shows that the company has a higher TIE ratio. The operating income (EBIT) is more than sufficient to cover the interest expense (22.59 times over). Therefore, the risk is reduced for debtholders, because there is a very low chance that the company will be unable be make interest payments.

Based on these ratios, it is recommended to buy the bond.