Alolo has bought from YoBank a 3 versus 6 Forward Rate Agreement which is based on a notional principal amount of USD 5 million and an agreed rate of 2% per annum. At the start of the FRA period, the actual rate of interest is 1.5% per annum. Explain what will take place at the start of the Forward Rate Agreement period and calculate the reimbursable amount, assuming a 360-day year

Alolo has bought from YoBank a 3 versus 6 Forward Rate Agreement which is based on a notional principal amount of USD 5 million and an agreed rate of 2% per annum. At the start of the FRA period, the actual rate of interest is 1.5% per annum. Explain what will take place at the start of the Forward Rate Agreement period and calculate the reimbursable amount, assuming a 360-day year

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 41P

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Alolo has bought from BolBank a 3 versus 6 Forward Rate Agreement which is based on a notional principal amount of USD 5 million and an agreed rate of 2% per annum. At the start of the FRA period, the actual rate of interest is 1.5% per annum. Explain what will take place at the start of the Forward Rate Agreementperiod and calculate the reimbursable amount, assuming a 360-day year.
Use the following information for the next two questions:On January 1, 20x1, ABC Co. obtained a five-year, ₱1,000,000 variable-rate loan with interest paymentsdue at each year-end and the principal due on December 31, 20x5.As protection from possible fluctuations in current market rates, ABC Co. enters into an interest rateswap for the whole principal of the loan. Under the agreement, ABC Co. shall receive variable interestand pay fixed interest based on a fixed rate of 8%. Swap payments shall be made at each year-end.The following are the current market rates: Jan. 1, 20x1 8% Jan. 1, 20x2 9% Jan. 1, 20x3 12% 62. How much is the fair value of the interest rate swap on December 31, 20x1? (Indicate whether it is aderivative asset or liability.)a. 32,397 assetb. 32,397 liabilityc. 46,884 assetd. 53,223 liability63. How much is the fair value of the interest rate swap on December 31, 20x2? (Indicate whether it is aderivative asset or liability.)a. 83,294 assetb. 83,294…
samson entered into an agreement with delilah bank whereby the latter shall pay the former double the amount after a period of n years. a.) if the agreed interest rate is 14% compounded yearly, how much is the accurate value of n1? b.) if the parties agreed to use of an approximate rule, how much is the value of n2?
A contract requires payments of $4954.00 today, $4004.00 in 3 years, and S 2583.00 in 5 years. When can the contract be fulfilled by a single payment equal to the sum of the required payments if money is worth 7% p.a. compounded semi - annually? State your answer in years and months (from 0 to 11 months).
This questi Consider a loan of $7700 at 6.8% compounded semiannually, with 18 semiannual payments. Find the following. (a) the payment necessary to amortize the loan (b) the total payments and the total amount of interest paid based on the calculated semiannual payments (c) the total payments and total amount of interest paid based upon an amortization table. (a) The semiannual payment needed to amortize this loan is $ 545.94. (Round to the nearest cent as needed.) (b) The total amount of the payments is $ 9827.07 (Round to the nearest cent as needed.) The total amount of interest paid is $ 2127.07 (Round to the nearest cent as needed.) (c) The total payment for this loan from the amortization table is $ (Round to the nearest cent as needed.) The total interest from the amortization table is $ (Round to the nearest cent as needed.)
A loan of R5000 is to be amortised over thirteen years by regular equal quarterly payments starting three months after the loan is granted. Interest on the loan is charged at 12,8% p.a compounded quarterly. Immediately after the fourth payment, the interest rate changes to 13% p.a. compounded quarterly. If the payments remain unchanged from the fifth payment onwards, then the new final amount ( to the nearest cent) needed to amortise the loan in the original time period, is equal to R
A contract requires payments of $4610.00 today, $5440.00 in 2 years, and $4438.00 in 5 years. When can the contract be fulfilled by a single payment equal to the sum of the required payments if money is worth 7% p.a. compounded semi-annually? State your answer in years and months (from 0 to 11 months). The contract can be fulfilled in year(s) and 40001 month(s).
Answer the given problem below. Attach a complete solution. A loan of P5000 is made for a period of 13 months, from January 1 to January 31 the following year, at interest rate of 20%. What future amount is due at the end of the loan period for an (a) ordinary and (b) exact interest rate?
Consider a loan of $7700 at 6.8% compounded semiannually, with 18 semiannual payments. Find the following. (a) the payment necessary to amortize the loan (b) the total payments and the total amount of interest paid based on the calculated semiannual payments (c) the total payments and total amount of interest paid based upon an amortization table. (a) The semiannual payment needed to amortize this loan is $ (Round to the nearest cent as needed.) (b) The total amount of the payments is $ (Round to the nearest cent as needed.) The total amount of interest paid is $. (Round to the nearest cent as needed.) (c) The total payment for this loan from the amortization table is $ (Round to the nearest cent as needed.) The total interest from the amortization table is $ (Round to the nearest cent as needed.)
You enter into a five-to-eight-month forward rate agreement with a firm. You agree to lend the firm a 3-month loan of $5 million starting 5 months from now, with a quarterly compounded forward interest rate of 2.5% per annum. Currently, the continuously compounded 5-month and 8-month interest rates are 3% per annum and 3.5% per annum, respectively. 1) What is the implied forward rate for the 3-month period starting 5 months from now? 2) What is the present value of this forward rate agreement to you now?
An investor who owns a interest rate swap pay six-month LIBOR and receive 18.1% (semi-annual compounding) on a principal of 95 million Euro. The remaining life of this swap is 15 months (1.25 years). The LIBOR rates for 3m, 9m and 15m are 19.1%, 19.6%, and 20.1% (continuous compounding), and the 6-month LIBOR on the last payment date (the most recent reset date) was 19.3% (semi-annual compounding). Calculate the value of the swap (in millions):
On January 1, 20x1, ABC Co. obtained a five-year, ₱1,000,000 variable-rate loan with interest payments due at each year-end and the principal due on December 31, 20x5. As protection from possible fluctuations in current market rates, ABC Co. enters into an interest rate swap for the whole principal of the loan. Under the agreement, ABC Co. shall receive variable interest and pay fixed interest based on a fixed rate of 8%. Swap payments shall be made at each year-end. The following are the current market rates: Jan. 1, 20x1 8% Jan. 1, 20x2 9% Jan. 1, 20x3 12% 16. How much is the fair value of the interest rate swap on December 31, 20x1? (Indicate whether it is a derivative asset or liability.) a. 32,397 asset b. 32,397 liability c. 46,884 asset d. 53,223 liability