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Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow...
Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow...
Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow $10,000,000 fixed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectively Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectively A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR- 0.15%, in exchange the swap bank...
QUESTION 1 Company X wants to borrow $10,000,000 floating for 5 years & company Y wants...
QUESTION 1 Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow $10,000,000 fixed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectively. Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectively. A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR -0.15 percent; in exchange...
Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000...
Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown here: Fixed-Rate Borrowing Cost Floating-Rate Borrowing Cost LIBOR LIBOR + 1.5% Company X Company Y 10% 12% A swap bank proposes the following interest only swap: Y will pay the swap bank annual payments on $10,000,000 with a fixed rate of rate of 9.90 percent. In exchange the swap bank will pay to company...
There are two companies, A and B. They have the following fixed and floating borrowing costs:...
There are two companies, A and B. They have the following fixed and floating borrowing costs: A B Fixed rate borrowing 4.5% 6% Floating rate borrowing LIBOR LIBOR + .75% A plans to borrow floating rate from Bank X and B plans to borrow fixed from Bank Y. Both companies are taking 5 year $100,000,000 loans with quarterly payments. A and B will then enter a swap contract with each other. (a) Design a fixed-for-floating swap in which A and...
Company A prefer fixed rate and can borrow from Bank A. Bank A's Pricing Schedule Fixed...
Company A prefer fixed rate and can borrow from Bank A. Bank A's Pricing Schedule Fixed interest Floating interest rate 9% LIBOR + 0.34% Bank A takes a commission of 0.2% Company B prefer floating rate and can borrow from Bank B. Bank B's Pricing Schedule Fixed interest Floating interest rate 7.7% LIBOR + 0.3% Bank B takes a commission of 0.3% . Both companies enter into an interest rate swap, what is the total cost saving? • If 40%...
Company Econ can borrow USD 10 million from Bank A for 2 years at a fixed...
Company Econ can borrow USD 10 million from Bank A for 2 years at a fixed and floating rate. Econ prefers to borrow at fixed rates on a semi-annual basis. Bank A offers the following pricing schedule for 6-month US dollars LIBOR, where the rates are mid-rates: Bank A's Pricing Schedule (2 years) for Company Econ Fixed interest rate per Floating interest rate per annum annum 9 % USD LIBOR + 34 basis points Bank A takes a bid-offer spread...
Firm ABC needs to borrow $1 million at a floating rate. In the market, firm ABC...
Firm ABC needs to borrow $1 million at a floating rate. In the market, firm ABC can borrow at 13% fixed rate per year or a floating rate equal to LIBOR. A swap bank proposes a swap contract. Firm ABC pays the swap bank a floating rate equal to LIBOR + 1% per year, and the swap bank pays firm ABC a fixed rate 15% per year. If firm ABC borrows $1 million at 13% fixed rate and gets into...
Company A can borrow fixed at 14.8 percent and floating at LIBOR percent. Company B can...
Company A can borrow fixed at 14.8 percent and floating at LIBOR percent. Company B can borrow fixed at 16.2 percent and floating at LIBOR+ 0.35 percent. A financial intermediary charges a fee of 0.14 percent. Company A wishes to borrow floating and company B wishes to borrow fixed. Assume the gain is evenly split between the two parties and floating rate legs are LIBOR. Design the swap. What is the company A's fixed rate leg and company B's fixed...
P9.14 Interest Rate Swap: Journal Entries and Valuation Johnson & Johnson (J&J) has $10,000,000 of floating...
P9.14 Interest Rate Swap: Journal Entries and Valuation Johnson & Johnson (J&J) has $10,000,000 of floating rate debt, with interest at LIBOR + 120 bp adjusted quarterly, and an equivalent amount of 2-year fixed-rate debt investments yielding 4 percent annually. J&J classifies the investments as held-to-maturity. To match fixed rate financing with its fixed-rate investments, J&J swaps 3 percent fixed payments to intermediary in exchange for LIBOR + 120 bp on the notional amount of $10,000,000 for 2 years, and...
Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost....
Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Lluvia would prefer the flexibility of floating rate borrowing, while Paraguas wants the security of fixed rate borrowing. Lluvia is the more creditworthy company. They face the following rate structure. Lluvia, with the better credit rating, has lower borrowing costs in both types of borrowing. Lluvia wants floating rate debt, so it could borrow at LIBOR+1.000%. However, it could borrow fixed at 9.500%and swap...
Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow $10,000,000 fixed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectively Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectively A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR- 0.15%, in exchange the swap bank...
QUESTION 1 Company X wants to borrow $10,000,000 floating for 5 years & company Y wants to borrow $10,000,000 fixed for 5 years. Company X and Y fixed rate borrowing costs are 10% and 12% respectively. Company X and Y floating rate borrowing costs are LIBOR and LIBOR plus 1.5% respectively. A swap bank proposes the following interest only swap X will pay the swap bank annual payments on $10,000,000 with the coupon rate of LIBOR -0.15 percent; in exchange...
Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are shown here: Fixed-Rate Borrowing Cost Floating-Rate Borrowing Cost LIBOR LIBOR + 1.5% Company X Company Y 10% 12% A swap bank proposes the following interest only swap: Y will pay the swap bank annual payments on $10,000,000 with a fixed rate of rate of 9.90 percent. In exchange the swap bank will pay to company...
Company A prefer fixed rate and can borrow from Bank A. Bank A's Pricing Schedule Fixed interest Floating interest rate 9% LIBOR + 0.34% Bank A takes a commission of 0.2% Company B prefer floating rate and can borrow from Bank B. Bank B's Pricing Schedule Fixed interest Floating interest rate 7.7% LIBOR + 0.3% Bank B takes a commission of 0.3% . Both companies enter into an interest rate swap, what is the total cost saving? • If 40%...
Company Econ can borrow USD 10 million from Bank A for 2 years at a fixed and floating rate. Econ prefers to borrow at fixed rates on a semi-annual basis. Bank A offers the following pricing schedule for 6-month US dollars LIBOR, where the rates are mid-rates: Bank A's Pricing Schedule (2 years) for Company Econ Fixed interest rate per Floating interest rate per annum annum 9 % USD LIBOR + 34 basis points Bank A takes a bid-offer spread...
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