Green’s Enterprise is contemplating the most feasible method of obtaining financing. It was proposed that the entity should issue a four-year convertible loan note. The loan note will have a
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Green’s Enterprise is contemplating the most feasible method of obtaining financing. It was
proposed that the entity should issue a four-year convertible loan note. The loan note will have a
nominal value of $100 million, which will have a nominal rate of 4% when the market rate of
interest is 10%. The loan will pay interest on annual basis.
Required:
a. What amounts will be shown as a financial liability and as equity when the convertible
loan notes are issued? Show the relevant
b. What amounts will be shown in the statement of profit or loss and statement of financial
position for year two?
c. Assuming the loan did not have any conversion features, but was instead issued at a
discount of 15% and had issue cost of $4.019 million:
i. show the journal entries for the initial issue of the loan
ii. determine its carrying value at the end of the each of the four years
iii. show the relevant financial statement extracts at the end of the first year
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- You enter into a "reverse repo" transaction meaning that the counterparty delivers some securities (let's say t-bonds) to you and borrows from you. According to the agreement, you lend 25.000 TL for 20 days with an annual repo yield of 8%. However, suppose that you immediately needed urgent liquidity. You decided to enter into a "repo" transaction now with another party by using the t- bonds of the reverse repo counterparty. This new agreement allows you to borrow 20.000 TL for 8 days with an annual repo yield of 6%. What would be the total profit at the maturity of the "repo" transaction? (1 year = 360 days)1. Companies A and B have been offered the following rates per annum on a $50 million five-year loan: Company A Company B Fixed rate 4.0% 5.2% Floating rate SOFR+0.2% SOFR+0.6% Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a swap that will net a financial institute, acting as intermediary, 0.2% per annum and that will appear equally attractive to both companies.Compare the required credit risk capital under Basel I and Basel Il for the following set of arrangements. (a) A 2 year interest rate swap with a principal of $100 million traded with an AA rated company, currently worth 2.5 million (b) $30 million 3 year Treasury bond with a BBB rated OECD sovereign (c) $20 million claims secured by residential mortgages (d) A six month corporate loan of $ 25million to an A+ rated company
- Assume that XYZ Company has a loan agreement that states that it must maintain a fixed-charge coverage ratio greater than or equal to 1.0 They have net income of $75, noncash charges of $25, current loan maturities of $60, stock repurchases of $10, and replacement capital expenditures of $20. Which of the following statements is true? 1) Multiple choice question. - Their fixed-coverage ratio is 1.1. - Their fixed-coverage ratio is 2.0. - They have violated their affirmative covenant since their fixed-coverage charge is less than 1.0. -They can pay a dividend of no more than $20 to remain within the covenant. 2) The net worth safety margin can be calculated as the difference between a firm's Multiple choice question. - actual minimum net worth and covenant minimum net worth. - actual maximum net worth and covenant maximum net worth. - covenant minimum net worth and covenant maximum net worth. - actual minimum net worth and actual maximum net worth. 3) Which of the following are true of…As an alternative, you are contemplating to incorporate and issue a bond to raise the capital instead of borrowing from the bank. Required part C Is there an advantage to issuing bonds rather than borrowing money from the bank? Suppose you decide to go this route and you issue a $130,000, 9%, 5-year bonds for $115,375 when the market rate is 12%. The bonds pay interest semi-annually. Prepare an amortization table for the first three payments. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. July 1, 2021: entry to record issuing the bonds. 31, 2021: entry to record payment of interest to bondholders. 31, 2021: entry to record amortization of premium.Hello, I have attached the full question below, but I just need help with a few parts, not the whole thing. I have also attached a screenshot of what I already have. I understand this question is complex, but can someone please help. On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the…
- Compañía CSB, S.A., requires short-term financing and requests a loan from Banco del Comercio, and proposes to guarantee it with inventories, for an amount of US$ 500,000.00. The bank accepts the proposal, with the following credit conditions: Credit conditions: a) Term 1 year b) He receives the inventories for a value of 90% of the value c) Charges you a 3% disbursement fee d) the interest rate is 20% per year e) The costs related to the mobilization of inventories are borne by Meyer Co., which are 3% of 100% of the value of the inventories. All costs involved must be covered in advance and will be deducted at the time of disbursement. It is requested: 1.- Determine the amount of the credit 2.- Calculate each cost involved in the transaction 3.- Determine the total amount of costs 4.- Determine the net amount you will receive after deducting the total costs 5.- Calculate the real rate of financial cost (TEA)(Q) A borrower takes out a 5/1 Hybrid ARM for $600,000 with an initial contract interest rate of 5.5%. The interest rate will adjust according to the 1-year LIBOR rate, plus a margin of 2%. At the first reset date, 1-year LIBOR is at 5.5%. What will the borrowers' monthly payment be immediately after the first reset? (State the payment as a positive number. Unless otherwise stated, you can assume 5/1 ARMs have a term of 30 years. Round your answer to 2 decimal places.)Company A borrows $2 million at Libor + 3% for five years and Company B takes a $2 million five-year loan at a fixed 7% interest rate. The two companies enters into an interest rate swap arrangement, where Company A will pay Company B a fixed 6% interest rate on a notional $2 million and Company B will pay Company A Libor + 2% on a notional $2 million. What has been accomplished? Question 16 options: Both companies have been able to link the payment to Libor Company A has achieved payments mirroring a fixed interest rate while Company B will be paying a floating rate Company A has achieved payments mirroring a floating interest rate while Company B has achieved a fixed rate Both companies will be paying the same interest rate for the duration of the loan
- Company A and B have been offered the following rates per annum on a £50 million, 10 - year loan. Company A borrows at a fixed rate of 6% and floating rate of (LIBOR + 0.4)%. Company B borrows at a fixed rate of 7% and a floating rate of (LIBOR + 0.6)%. a) Company A requires a floating rate loan, whereas company B requires a fixed rate loan. In which market does company A have a comparative advantage? Design at least two different swaps that will give a bank, acting as an intermediary 0.6% p.a. and that will appear equally attractive to both companies. Explain how to achieve this, using diagrams and text. b) Design a Swap that is the most beneficial to company A. Explain using text and diagram. c) Suppose that company A has an asset worth £10 million yielding an interest of 7%. Suppose that A is a company based in Japan. Explain how it can use a currency swap to transform the asset to an asset paying Yen (currency in Japan).NOP Co. has agreed to the following loan proposal by a bank:▪ Stated interest rate of 10% on a one-year discounted note ▪ 15% of the loan as compensating balance with zero-interest current account to be maintained with the bank. ▪ The loan will have net proceeds of P1,500,000. Required:1. How much is the principal amount of the loan?ABC Corporation wishes to raise money by selling a 90-day promissory note in the short-term money markets. The note promises to pay the holder $17,000,000 at maturity. If yields on similar risk notes are currently 2.8% p.a., how much money will ABC Corporation receive for the note? If the purchaser of the note holds it until maturity, what is the total amount of interest they will earn? For the purchaser in 2), what will be the return on investment (ignoring taxes)? Need help answering all these please!