Homework Answers
The LIBOR is the london interbank offered rate .
Where the interist rate swaps are can be used in both Fixed and Floating rate can be exchanged with threre operations.
The both intetrest rate swap and LIBOR is exchanged were there is the bor Risk free rate and cash flows are are can be easily echanged with floating rates.
Mostly we can exchange the LIBOR (short term) with swap (both short term and long term) perspectives were the exchange can be happen with easy flow of cash with less risk.
Answer (A).
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Which of the following is a way of valuing interest rate swaps where LIBOR is exchanged...
Cement Al-Yamamah has just entered into a two-year floating-for-fixed swap contract, where payments are made every...
Cement Al-Yamamah has just entered into a two-year
floating-for-fixed swap contract, where payments are made every six
months. The 6-month LIBOR is 4.11%. The 6 to 12 months forward
LIBOR rate is 5.92% and the 12 to 18 month forward LIBOR rate is
8.19. The two-year swap rate is 5.1%. If the OIS rate is 3.5% and
the term structure of the OIS rate is flat, what is the 18 to 24
month Forward LIBOR rate? All rates are semi-annually...
Suppose that OIS rates of all maturities are 6% per annum, continuously compounded. The one-year LIBOR...
Suppose that OIS rates of all maturities are 6% per annum, continuously compounded. The one-year LIBOR rate is 6.4%, annually compounded and the two-year swap rate for a swap where payments are exchanged annually is 6.8%, annually compounded. Which of the following is closest to the LIBOR forward rate for the second year when LIBOR discounting is used and the rate is expressed with annual compounding
Explain why an Interest Rate Swap (assume LIBOR as the floating rate) with quarterly settlement (assume...
Explain why an Interest Rate Swap (assume LIBOR as the floating
rate) with quarterly
settlement (assume 90 days per quarter) can be viewed as a strip of
Eurodollar futures
contracts. (Note: A strip is a sequence of ED futures with
successive expirations)
(b) The following table gives the bid and offer fixed rates in the
swap market and the
corresponding swap rates
(i) Suppose that Company X can invest for 4 years at 4.5%.
Recommend a floating
rate, can it...
a) ABC Ltd is interested to sell an existing fixed-for-floating interest rate swap to one of...
a) ABC Ltd is interested to sell an existing fixed-for-floating interest rate swap to one of its corporate clients. Under the existing swap, ABC Ltd pays 10% pa and receive 3-month LIBOR on a $10 million principal. Cash flows are exchanged every quarter. The swap has a remaining life of 16 months. Data shows that the 3-month LIBOR rate 1 month ago was 11.8% pa; 2 months’ ago it was 12% pa; 3 months’ ago it was 12.2% pa and...
Consider the image above involving swaps between a commercial bank, a life insurance company and a...
Consider the image above involving swaps between a commercial
bank, a life insurance company and a swap dealer. The letter "A"
represents,
Options:
a.
Floating rate cash flows
b.
Fixed rate Cash Flow
The life insurance company will (choose two)
Options:
a.
Pay fixed cash flows to the swap dealer.
b.
Pay floating Cash Flows to the swap dealer.
c.
Receive fixed cash flows from the swap dealer.
d.
Receive floating cash flows from the swap dealer.
The commercial bank...
Which of the following in not true of interest rate swaps? A. Payments are based on...
Which of the following in not true of interest rate swaps? A. Payments are based on notional principal to which interest rates are applied. B. Contracts are more standardized than other derivatives. C. Swap markets are characterized by over-the-counter trading. D. All of the above are true.
QUESTION # 2 Consider a 1-year swap initiated on January 10th, 2013, between Sony and Samsung, Under the terms of the swap contract Sony is agreed to pay Samsung an interest of 6% per annum on a...
QUESTION # 2 Consider a 1-year swap initiated on January 10th, 2013, between Sony and Samsung, Under the terms of the swap contract Sony is agreed to pay Samsung an interest of 6% per annum on a notional principle of Max. Marks 2+1] $200 n Samsung agrees to pay a 3-month LIBOR rate on the same principal. In addition, the payments are exchanged every three months, andthe6%is quoted with quarterly compounding. Following Table shows the LIBOR Samsung (complete the Table...
Billy Enterprises can issue floating-rate debt at LIBOR + 2 percent or fixed-rate debt at 10.00...
Billy Enterprises can issue floating-rate debt at LIBOR + 2 percent or fixed-rate debt at 10.00 percent. Kidd Manufacturing can issue floating-rate debt at LIBOR + 2.95 percent or fixed-rate debt at 10.45 percent. Suppose Billy issues floating-rate debt and Kidd issues fixed-rate debt. They are considering a swap in which Billy will make a fixed-rate payment of 7.95 percent to Kidd, and Kidd will make a payment of LIBOR to Billy. a. What are the net payments of Billy...
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor...
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor with notional principal of USD 10,000,000. At the time the swap agreement was completed the swap quote was 0.50% bid and 0.60% offered against the 1-year dollar Libor, and the spot rate was JPY100/$ (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...
INTEREST RATE SWAP HW PROBLEM Firm A can issue fixed-rate debt e-40:0 and floating rate debt...
INTEREST RATE SWAP HW PROBLEM Firm A can issue fixed-rate debt e-40:0 and floating rate debt e LIBOR+ 20 bps. Firm B, less credit worthy, can issue fixed-rate debt @ 12.0% and floating rate debt @ LIBOR + 60 bps. Firm A wishes to issue floating rate debt and firm B wishes to issue fixed rate debt. Take the part of a swap intermediary and create a fixed floating interest rate swap with terms that benefit all three partiesfirm A,...
Cement Al-Yamamah has just entered into a two-year
floating-for-fixed swap contract, where payments are made every six
months. The 6-month LIBOR is 4.11%. The 6 to 12 months forward
LIBOR rate is 5.92% and the 12 to 18 month forward LIBOR rate is
8.19. The two-year swap rate is 5.1%. If the OIS rate is 3.5% and
the term structure of the OIS rate is flat, what is the 18 to 24
month Forward LIBOR rate? All rates are semi-annually...
Explain why an Interest Rate Swap (assume LIBOR as the floating
rate) with quarterly
settlement (assume 90 days per quarter) can be viewed as a strip of
Eurodollar futures
contracts. (Note: A strip is a sequence of ED futures with
successive expirations)
(b) The following table gives the bid and offer fixed rates in the
swap market and the
corresponding swap rates
(i) Suppose that Company X can invest for 4 years at 4.5%.
Recommend a floating
rate, can it...
Consider the image above involving swaps between a commercial
bank, a life insurance company and a swap dealer. The letter "A"
represents,
Options:
a.
Floating rate cash flows
b.
Fixed rate Cash Flow
The life insurance company will (choose two)
Options:
a.
Pay fixed cash flows to the swap dealer.
b.
Pay floating Cash Flows to the swap dealer.
c.
Receive fixed cash flows from the swap dealer.
d.
Receive floating cash flows from the swap dealer.
The commercial bank...
QUESTION # 2 Consider a 1-year swap initiated on January 10th, 2013, between Sony and Samsung, Under the terms of the swap contract Sony is agreed to pay Samsung an interest of 6% per annum on a notional principle of Max. Marks 2+1] $200 n Samsung agrees to pay a 3-month LIBOR rate on the same principal. In addition, the payments are exchanged every three months, andthe6%is quoted with quarterly compounding. Following Table shows the LIBOR Samsung (complete the Table...
INTEREST RATE SWAP HW PROBLEM Firm A can issue fixed-rate debt e-40:0 and floating rate debt e LIBOR+ 20 bps. Firm B, less credit worthy, can issue fixed-rate debt @ 12.0% and floating rate debt @ LIBOR + 60 bps. Firm A wishes to issue floating rate debt and firm B wishes to issue fixed rate debt. Take the part of a swap intermediary and create a fixed floating interest rate swap with terms that benefit all three partiesfirm A,...
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