Suppose I'm a speculator looking to make a profit off of interest rate swaps. If I...
Suppose I'm a speculator looking to make a profit off of interest rate swaps. If I believe that interest rates will go up in the future, I should ____________________ on the notional principal.
pay a fixed interest rate and receive a fixed interest rate
pay a floating interest rate and receive a floating interest rate
pay a fixed interest rate and receive a floating interest rate
receive a fixed interest rate and pay a floating interest rate
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Suppose I'm a speculator looking to make a profit off of
interest rate swaps. If I...
please answer all of them QUESTION 1 10 points According to Alan Blinder, which of the...
please answer all of them
QUESTION 1 10 points According to Alan Blinder, which of the following contributed to the financial crisis? Extremely high inflation rates The growth of China's manufacturing sector Lax regulation of the financial sector The McFadden Act of 1927 QUESTION 2 10 points Sa Suppose I'm a hedger with a lot of Treasury Bills on my balance sheet. If I want to lower my risk profile, I should get an interest rate swap where , on...
A US company has entered into an interest rate swap with a dealer in which the...
A US company has entered into an interest rate swap with a dealer in which the notional principal is $50 million. The company will pay a floating rate of LIBOR and receive a fixed rate of 5.75%. Interest is paid semi-annually, and the current LIBOR=5.15%. What is the total amount that the asset manager will pay to (or receive from) the dealer? [Note: You should use a positive number to represents the amount the asset manager pay to the dealer....
3. Suppose today’s interest rate environment is very low (it is) and you believe that the...
3. Suppose today’s interest rate environment is very low (it is) and you believe that the only direction for interest rates to go is up. Which would be the best type of bond to invest in and why? a: a 20-year zero b: a 10-year 8% coupon paying bond c: a 90-day treasury note or bill d: a floating rate bond which has a coupon of the BBSW rate + 1%
Modified duration gap of 3 year and market value of assets of 3 million. Manager expects interest rates to go up from 9% to 10%. Question: show how can the manager immunize the bank assets from intere...
Modified duration gap of 3 year and market value of assets of 3 million. Manager expects interest rates to go up from 9% to 10%. Question: show how can the manager immunize the bank assets from interest rate change by using following 2 Swaps: Swap 1: pay T-bill +1% in exchange for 7% fixed rate. Swap 2: pay fixed rate of 7% in exchange for a floating rate of T-bill +1%. Assume modified duration on 7% fixed rate security is...
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor...
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor with notional principal of USD 10,000,000. At the time the swap agreement was completed the swap quote was 0.50% bid and 0.60% offered against the 1-year dollar Libor, and the spot rate was JPY100/$ (assume payments are annual). Assume that 1 year has passed. The spot exchange rate is JPY 98/USD. The dealer is quoting the following interest rates on 4-year swaps: 1.50% bid...
The answer i am looking for is 7.4786% but i have no idea what to do....
The answer i am looking for is 7.4786% but i have no idea what
to do. Any help would be great, also please show work so i can
follow what to do. Thank you.
Exercise (9.11) Suppose that ZYX's loan in Example (9.10) is 400 million at time 0, and that ZYX has agreed to pay interest at the 1-year spot rate and also repay 100 million of principal at the end of each of the 4 years. ZYX enters...
I'm not sure how they got that answer Suppose that a company enters into a FRA...
I'm not sure how they got that answer
Suppose that a company enters into a FRA that is designed to ensure it will receive a fixed rate of 3.7% on a principal of $100,000,000 for a six-month period beginning in 4 years. If, in 4 years the six-month LIBOR is 5.0% for the ensuing six-month period, what is the value of the FRA at that point in time (i.e. in 4 years)? (Required precision: 0.01 +/- 0.01) All interest rates...
1a) Suppose the 1-year effective annual interest rate is 4.9% and the 2-year effective rate is...
1a) Suppose the 1-year effective annual interest rate is 4.9% and the 2-year effective rate is 6.5%. Compute the fixed rate in a 2-year amortizing interest rate swap based on $460,000 of notional principal in the first year and $390,000 in the second year. Answers: a. 5.67% b. 6.62% c. 6.32% d. 5.60% e. 6.45% 1b) Suppose that 1-year, 2-year, and 3-year forward prices for the British pound are $1.76/£, $1.67/£, and $1.37/£, respectively. The 1-year, 2-year, and 3-year effective...
This problem illustrates how to [1] determine the payments of an interest rate swap, [2] value...
This problem illustrates how to [1] determine the payments of an interest rate swap, [2] value the swap, [3] and hedge with the swap. The problem is based on the WSJ article “School District, Bank in Swap clash”. The setting: The local school district was planning to build a new high school. The estimated cost of the building was around $100M. To finance the building the school district needed to issue a bond for about $58M. It had two choices:...
1 Netflix Co. that has been floating rate notes now believes that interese rise I decides...
1 Netflix Co. that has been floating rate notes now believes that interese rise I decides to protect itself nainst this possibility by entering into an in rate swap with a dealer. In this swap, the notional principal is $80 million and the company will pay a fixed rate of 5.5 percent and receive LIBOR. The current LIROU is 5 percent. Calculate the first payment and indicate which party (Netflix or the dealer) prys which Assume that payments will be...
please answer all of them
QUESTION 1 10 points According to Alan Blinder, which of the following contributed to the financial crisis? Extremely high inflation rates The growth of China's manufacturing sector Lax regulation of the financial sector The McFadden Act of 1927 QUESTION 2 10 points Sa Suppose I'm a hedger with a lot of Treasury Bills on my balance sheet. If I want to lower my risk profile, I should get an interest rate swap where , on...
The answer i am looking for is 7.4786% but i have no idea what
to do. Any help would be great, also please show work so i can
follow what to do. Thank you.
Exercise (9.11) Suppose that ZYX's loan in Example (9.10) is 400 million at time 0, and that ZYX has agreed to pay interest at the 1-year spot rate and also repay 100 million of principal at the end of each of the 4 years. ZYX enters...
I'm not sure how they got that answer
Suppose that a company enters into a FRA that is designed to ensure it will receive a fixed rate of 3.7% on a principal of $100,000,000 for a six-month period beginning in 4 years. If, in 4 years the six-month LIBOR is 5.0% for the ensuing six-month period, what is the value of the FRA at that point in time (i.e. in 4 years)? (Required precision: 0.01 +/- 0.01) All interest rates...
1 Netflix Co. that has been floating rate notes now believes that interese rise I decides to protect itself nainst this possibility by entering into an in rate swap with a dealer. In this swap, the notional principal is $80 million and the company will pay a fixed rate of 5.5 percent and receive LIBOR. The current LIROU is 5 percent. Calculate the first payment and indicate which party (Netflix or the dealer) prys which Assume that payments will be...
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