Business, 12.06.2021 02:30 eddiewoods56881

Consider a plain vanilla interest rate swap. Firm A can borrow at 8% fixed or can borrow floating at LIBOR. Firm B is somewhat less creditworthy and can borrow at 10% fixed or can borrow floating at LIBOR + 1%. Firm A wants to borrow floating and Firm B prefers to borrow fixed. Both corporations wish to borrow $10 million for 5 years. Which of the following swaps is mutually beneficial to each party and meets their financing needs? A) Firm A borrows $10 million externally for 5 years at LIBOR; agrees to swap LIBOR to firm B for 8 ½ % fixed for 5 years on a notational principal of $5 million; B borrows $10 million externally at 10%. B) A borrows $10 million externally for 5 years at LIBOR; agrees to pay 8½% to B for LIBOR fixed for 5 years on a notational principal of $5 million; B borrows $10 million externally at 10%. C) Since the QSD = 0 there is no mutually beneficial swap. D) A borrows $10 million externally at 8% fixed for 5 years; agrees to swap LIBOR to B for 8½% fixed for 5 years on a notational principal of $5 million; B borrows $10 million externally at LIBOR + 1%.

Answers: 1

Show answers

Another question on Business

Business, 21.06.2019 21:00

Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. the economist proposes the following relationship: p=a x m - p=price level - m=money supply - a=a composite of other factors, including real gdp, that change very slowly over time. how might an economist gather empirical data to test the proposed relationship between money and the price level? an economist would persuade the federal reserve to change the money supply to various levels, and observe the resulting changes in the price level. unlike researchers in the hard sciences, economists cannot study complex relationships using data. economists do not usually develop theoretical models of the economy but only analyze summary statistics about the current state of the economy. an economist would look for data on past changes in the money supply, and note the resulting changes in the price level

Answers: 1

Answer

Business, 22.06.2019 03:00

How does having a flexible mind you become a better employee? a. it you become more honest toward work. b. it you become a team player. c. it you learn new things that will better your performance. d. it you to finish your work on time. e. it you reach work on time

Answers: 1

Answer

Business, 22.06.2019 06:00

List three careers that require knowledge of science. list three careers that require the use of of math. list three careers that require the use of foreign language. list three careers that require the use of good writing skills. list three careers that require the use of good computer skills.

Answers: 3

Answer

Business, 22.06.2019 17:30

Betty contracted with scooby’s skate store to deliver a pair of skates to jake for his birthday. scooby’s owner was going on a trip and delegated the delivery of the skates to brian. brian failed to make delivery.can jake sue brian for breach of contract, as he was not a party to the original contract? explain your answer. brian was not a party to the original contract. why would a court hold him responsible for failing to make delivery? if you do not think a court would hold him responsible, explain your answer. can jake sue scooby’s skates for breach of contract? explain your answer.

Answers: 2

Answer

You know the right answer?

Consider a plain vanilla interest rate swap. Firm A can borrow at 8% fixed or can borrow floating at...

Questions