Companies X and Y both wish to raise $100 million 10-year loans. Company X wishes to borrow at a fixed rate of interest as it wants to have a certainty about its future interest liabilities, while company Y wishes to borrow at a floating rate because its treasurer believes that interest rates are likely to fall in the future. Company X has been offered a fixed interest loan at 13% and a floating rate loan at LIBOR + 2.5%. Company Y has a better credit rating than X and has been offered a fixed interest loan at 10% and a floating rate at LIBOR + 1%. Describe through the use of a diagram how you can bring these companies together in an interest rate swap that would make them both better off without the intervention of a swap dealer. QSD distribution: 1% benefit to Company X.

If money is not an economic resource, why is interest paid and received for its use? What considerations account for the fact that interest rates differ greatly on various types of loans? Use those considerations to explain the relative sizes of the interest rates on the following:a. A 10-year $1000 government bond.b. A $20 pawnshop loan.c. A 30-year mortgage loan on a $145,000 house.d. A 24-month $12,000 commercial bank loan to finance the purchase of an automobile.e. A 60-day $100 loan from a personal finance company.

D3) Finance Calculate the loan risk associated with a $4 million, five-year loan to a BBB-rated corporation in the computer parts industry that has a duration of 5.8 years. The cost of funds for the bank is 8 per cent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 4.0 per cent. The current market rate for loans in this industry is 11 per cent.

CB Solutions. Heather O'Reilly, the treasurer of CB Solutions, believes interest rates are going to rise, so she wants to swap her future floating-rate interest payments for fixed rates. Presently, she is paying per annum on $5,200,000 of debt for the next two years, with payments due semiannually. LIBOR is currently 3.988% per annum. Spread paid over LIBOR, per annum is 2.000%. Heather has just made an interest payment today, so the next payment is due six months from now. Heather finds that she can swap her current floating-rate payments for fixed payments of 7.004% per annum. (CB Solutions' weighted average cost of capital is 12%, which Heather calculates to be 6% per 6-month period, compounded semiannually). a. If LIBOR rises at the rate of 50 basis points per 6-month period, starting tomorrow, how much does Heather save or cost her company by making this swap? b. If LIBOR falls at the rate of 25 basis points per 6-month period, starting tomorrow, how much does Heather save or cost…

Consider two local banks. Bank A has 100 loans outstanding, each for $1.3 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $130 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $☐ million. (Round to two decimal places.)

Ivanhoe needs to borrow $7 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The prime rate is 4 percent, and Ivanhoe's current rating is prime + 2.45 percent. The yield on a five-year U.S. Treasury note is 1.98 percent, and the three-month U.S. Treasury bill rate is .10 percent. What is the estimated loan rate for the five-year bank loan? Estimated loan rate is %.

How do i calculate this corporate finance problem without using excel? You will be paying off a mortgage of $100,000 over the next 25 years. You have signeda loan agreement with the Toronto Dominion Bank to secure a rate of 15.4%, however youare planning to re-negotiate the loan at the end of 10 years, how much will your payments be over the first 10 years? What is the amount of principal that you paid off with the first payment?

Ranger Enterprises is considering pledging its receivables to finance a needed increase in working capital. Its commercial bank will lend 70 percent of the pledged receivables at 2.5 percentage points above the prime rate, which is currently 10 percent. In addition, the bank charges a service fee equal to 2 percent of the pledged receivables. Both interest and the service fee are payable at the end of the borrowing period. Ranger’s average collection period is 55 days, and it has receivables totaling $7 million that the bank has indicated are acceptable as collateral. Calculate the annual financing cost for the pledged receivables. Assume that there are 365 days per year. Round your answer to two decimal places.   %

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Consider two local banks. Bank A has 87 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $87 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)