The net amount to be paid = Difference in Interest amount
Since LIBOR is higher than the fixed rate, Boeing will pay Bank America
Amount = 500,000,000*(6.5%-5.75%)
= $3,750,000
Hence, the answer is Boeing pays Bank America $3,750,000
Faise QUESTION 21 Boeing has entered into 10 year interest rate swap with Bank America with...
Polar Ice has entered into a 10 year interest rate swap with Southern Sun with a notional principal of $500 million. Polar Icehas agreed to pay LIBOR – the floating rate side of the swap. Southern Sun has agreed to pay a fixed rate of 5%. Assume that next year, LIBOR is 5.5%. The net payment at that date will be: a. Polar Ice pays Southern Sun $5,000,000 b. Polar Ice pays Southern Sun $750,000 c. Polar Ice pays Southern...
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....
SNAP agrees to pay 1.5% per annum on a notional $8 million at 6 month intervals for 10 years. In return SNAP will receive a floating rate on the $8 million over the same time perid from HSBC. HSBC will pay floating=LIBOR+ 25bp =(LIBOR+0.25%). Current LIBOR is quoted at 1% per annum.What is the floating rate HSBC pays?Who is long?Who is short?At the first swap interval (6 month), what is the net payment and by whom?
11. The Florida Investors Bank raised $300 million for four years at a fixed interest rate of 6% and then loaned the funds to Energy Associates of Fort Lauderdale Inc. The loan calls for an interest rate that varies every year. The interest rate that Energy Associates of Fort Lauderdale agreed to pay is LIBOR plus 300 basis points. At the same time, Florida Investors Bank entered into a four-year interest rate swap with an investment banking firm, Morgan Stanley,...
A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per annum and pays six-month LIBOR on a principal of $10 million for five years. Payments are made every six months. Suppose that company X defaults on the sixth payment date (end of year 3) when the interest rate (with semiannual compounding) is 8% per annum for all maturities. What is the loss to the financial institution? Assume...
Consider the following information about an interest rate swap: two-year term, semiannual payment, fixed rate = notional USD 10 million. Calculate the net coupon exchange for the first period if LIBOR is 5% at the beginning of the period and 5.5% at the end of the period Q2. 6%, floating rate = LIBOR + 50 basis points, A. Fixed-rate payer pays USD 0 B. Fixed-rate payer pays USD 25,000 C. Fixed-rate payer pays USD 50,000 D. Fixed-rate payer receives USD...
An interest rate swap has the following specifications: Notional principal = $100m Pay fixed rate (annual basis) = 7% Received rate (annual basis) = LIBOR plus 1% Interest rate calculations are in quarterly basis. Counterparty X entered a pay fixed rate swap on Jan 1, 2019 with Counterparty Y. On Dec 31, 2019, the LIBOR rate is 5.5%. What should be the net cashflow?
Consider a plain vanilla fixed for floating interest rate swap with a notional principal of 4,100,000 and annual payments. Initially the swap was supposed to last for five years and now three years remain. If the initial fixed rate is 0.09, LIBOR is 0.08, and the year three payment was just made (two years of payments remain on the swap), What is the absolute value of the swap?
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor with notional principal of USD 10,000,000. At the time the swap agreement was completed the swap quote was 0.50% bid and 0.60% offered against the 1-year dollar Libor, and the spot rate was JPY100/$ (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...
6. Find the upcoming interest payments in a currency swap in which party A pays U.S. dollars at a fixed rate of 5 percent p.a. on a notional amount of $50 million and party B pays Swiss francs at a fixed rate of 4 percent p.a. on a notional amount of SF35 million. Payments are annual under the assumption of 360 days in a year, and there is no netting. A. party A pays $2,500,000, and party B pays SF1,400,000...