A bank sells a "three against six" $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three-month Eurodollar loan and having accepted a six-month Eurodollar deposit. The agreement rate with the buyer is 5.56 percent. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.905 percent. Determine how much the FRA is worth and who pays who-the buyer pays the seller or the seller pays the buyer. (Do not round intermediate calculations. Round your answer to 2 decimal places.) the absolute value of the FRA

A bank sells a "three against six" $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three-month Eurodollar loan and having accepted a six-month Eurodollar deposit. The agreement rate with the buyer is 5.56 percent. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.905 percent. Determine how much the FRA is worth and who pays who-the buyer pays the seller or the seller pays the buyer. (Do not round intermediate calculations. Round your answer to 2 decimal places.) the absolute value of the FRA

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 26P: (Appendix 13.1) Derivatives Danburg. Company has a 5 million, 9% bank loan outstanding with its...

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(Appendix 13.1) Derivatives Danburg. Company has a 5 million, 9% bank loan outstanding with its local bank. On January 1, 2019, when the loan has 4 years remaining, Danburg contracts with Bradford Investment Bank to enter into a 4-year interest-rate swap with a 5 million notional amount. Danburg agrees to receive from Bradford a fixed interest rate of 9% and to pay Bradford an interest amount each year that is variable based on the LIBOR interest rate at the beginning of the year. The interest payments are made at year-end. The applicable interest rate on the swap is reset each year after the annual interest payment is made. The LIBOR interest rate is 8.6% and 9.5% at the beginning of 2019 and 2020, respectively. The 3-year fixed interest rate is 10% at December 31, 2019, and the 2 year rate is 8% at December 31, 2020. Required: 1. Prepare the journal entries of Danburg for the bank loan and derivative for 2019 and 2020. Round calculations to the nearest dollar. 2. Prepare the appropriate disclosures in Danburgs financial statements for 2019 and 2020.
ExerciseInstallment Notes ABC bank loans $250,000 to Yossarian to purchase a new home. Yossarian will repay the note in equal monthly payments over a period of 30 years. The interest rate is 12%. Required: If the monthly payment is $2,571.53, how much of the first payment is interest expense and how much is principal repayment? (Note: Round to the nearest cent.)
Proceeds from notes payable On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of 150,000. A. Determine the proceeds of the note, assuming the note carries an interest rate of 10%. B. Determine the proceeds of the note, assuming the note is discounted at 10%.
Required: A bank sells a “three against six” $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three-month Eurodollar loan and having accepted a six-month Eurodollar deposit. The agreement rate with the buyer is 5.54 percent. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.895 percent. Determine how much the FRA is worth and who pays who—the buyer pays the seller, or the seller pays the buyer. Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a year.
QUESTION 16 A Bank lends a Nesta company. R500 000 for one year at 6.48% and requires a compensating balance of 10% of the face value of the loan. The effective annual interest rate associated with the loan is ... 7.00%. 7.20%. 8.00%. 8.90%.