A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below. Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 A bank is willing to offer the company a forward rate agreement (FRA), incorporating a forward rate fixed at the level calculated in part a). When the money is received, the €LIBOR rate is 0.35%. Calculate and explain the terms on which the FRA is settled

A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below. Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 A bank is willing to offer the company a forward rate agreement (FRA), incorporating a forward rate fixed at the level calculated in part a). When the money is received, the €LIBOR rate is 0.35%. Calculate and explain the terms on which the FRA is settled

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below. Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 Assume that the company wishes to undertake a money market hedge to fix the future deposit rate. Explain the character of the company’s interest rate risk exposure and calculate the annualised forward interest rate that it can achieve using the current interest rates. Base calculations on months rather than days.
If you borrow $9000 at an annual percentage rate (APR) of r (as a decimal) from a bank, and if you wish to pay off the loan in 3 years, then your monthly payment M (in dollars) can be calculated using: M = 9000 (er/12-1) / 1 - e-3r 1) Describe what M (0.035) would represent in terms of the loan, APR, and time. 2) If you are only able to afford a max monthly payment of $300, describe how you could use the above formula to figure out what the highest interest rate the bank could offer you and you would still be able to afford the monthly payments. In addition, determine the maximum interest rate that you could afford.
If you deposit $P into a savings account that earns interest at a rate of i% per month for n years, the future worth in year n is represented by all of the following equations, except: (a) F = $P(F∕P, effective i/month, 12n) (b) F = $P(F∕P, effective i/quarter, 3n) (c) F = $P(F∕P, effective i/6-month, 2n) (d) F = $P(F∕P, effective i/year, n)
If you are expecting to get OMR 66634 at the end of 3 years. Calculate its present value if the interest rate is 9% and is computed quarterly. Select one: a. 62333.02 b. 51019.88 c. 23696.30 d. 51454.83 e. All the given choices are not correct The commodities or assets that are traded in financial market are called Select one: a. Financial Service b. Financial System c. None of the options d. Financial Institution e. Financial Instrument
Assume that time today is Dec. 13, 2022. Determine what is being asked in each problem.1. Determine the value of ₱10,000 on July 12, 2022 assuming ordinary simple interest at 5.14% per annum.2. Determine the value of ₱20,000 on May 14, 2023 assuming simple discount of 4.96% per annum and using the Banker's Rule. 3. How much is the value of ₱40,000 on April 13, 2024 if money is worth 7 1/5% effective per year?
A firm sells its accounts receivables to a factor at a 3.5% discount. The average collection period is 3 month. a. What is the effective annual interest rate on this arrangement? (Round your answer to 2 decimal places.) b. What is the implicit effective annual interest rate if the average collection period is 5 months? (Round your answer to 2 decimal places.)
Use the formula A = P(1 + rt)to calculate the maturity value of the simple interest loan. (Round your answer to two decimal places.)P = $18,000, r = 8.7%, t = 4 months
A. Given the data in the table and the information below, please answer the following parts. Show all working and formulas used. Maturity (T) Spot Rate (%) r(1) r(2) r(3) r(4) r(5) r(6) 0.05 0.28 0.12 0.07 The forward råte for a 3-year loan beginning in 2 years is 0.08%. The forward rate for a 2-year loan starting in 3 years is -0.16%. 1) Please calculate the 3-year spot rate. 2) Please calculate the 2-year spot rate.
1. If you want to borrow K150,000 which of the following banks should you select? Explain clearly with necessary calculation. (i) Bank A requires quarterly repayments of K12,872.96 at the end of each quarter over 4 years. (ii) Bank B requires a total repayment of K276,360 at the end of 5 years.
2. Using the formula which is attached below, calculate the Future Value of disposable amount of money (5 000 CZK), if you can expect to earn 5% interest compounded annually on that money for the next two years. Prior to calculation fill in the table gaps. manually using TVM functions Principal Interest rate Time period Compounding frequency Total number of compounding periods Future value of money Future value of money (EUR) (as a decimal) (number of years) (times per year) (EUR) (EUR) 5,000 0.05 2 1 2 5,512.50 5,512,50
Give typing answer with explanation and conclusion A bank sells a “three against six” $5,000,000 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 5.41 percent. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.92 percent. Determine how much the FRA is worth. (report postive amount, with cents)
Assume the 3-month rate on AAA-rated banker’s acceptance is currently trading at 4% p.a. (per annum). A exporter holding a letter of credit (LC) from a AAA-rated bank with a face value of $1,000,000 wishes to sell it in the market. What price can she expect to receive?

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Money Market Euro Interest Rate Spreads (%)
1 month	2 months	3 months	4 months	5 months	6 months
0.20 - 0.25	0.28– 0.33	0.35 – 0.40	0.45 – 0.56	0.60 – 0.67	0.75 – 0.83