Analyse all the risks involved with investing into a bond offering of a Essent Group Ltd company.
Your task is to quantify the risk premium for the company by finding the interest rate spread over an appropriate interest rate curve. The interest rates for different maturities are usually not the same and corporate bonds are usually priced with an appropriate spread over a benchmark interest rate curve, which represents the risk-free rate. You should select a proper benchmark over which to find the spread for your chosen company. Essentially you are trying to quantify the risk premium of investing into this particular company over the benchmark rates. Keep in mind that your spread should be given in basis points over the benchmark curve. Try to break down the spread into its component risk factors as much as possible. In your report, you should discuss the spread and its component risk factors as well as suggesting enhancements or modifications in reference to a plain vanilla bond offering. After calculating the spread, suggest a bond offering with a maturity date, notional amount, and coupon rate. The company has indicated that they want to issue bonds with prices close to par as possible. The maturity for the proposed bond offering cannot be the same as the maturity of any of the company's existing bonds, nor can it be closer than six months in maturity to any bonds it currently has circulating in the market. You should show your work and calculation in an Excel spreadsheet.
To get the latest prices of the current bonds of publicly listed companies, go to the following link: https://finra-markets.morningstar.com/BondCenter/Default.jsp