Question: A company entered into an FRA. The terms of the agreement provide that the company will receive a fixed rate of 6% on a principal of $100 million between the end of years 1 and 2. The LIBOR rate for years 1 and 2 is 2.3079% and 3.4503%, while the forward rate at year 2 is 4.6055%. All rates are compounded annually. The value of the FRA is closest to: Question 19 options: −$1,303,032. +$872,900. +$1,303,032.
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Question:
A company entered into an FRA. The terms of the agreement provide that the company will receive a fixed rate of 6% on a principal of $100 million between the end of years 1 and 2. The LIBOR rate for years 1 and 2 is 2.3079% and 3.4503%, while the forward rate at year 2 is 4.6055%. All rates are compounded annually. The value of the FRA is closest to:
Question 19 options:
−$1,303,032.
+$872,900.
+$1,303,032.
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- 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 loanurrent Attempt in Progress Assume that Henry Corporation has a contractual debt outstanding. Henry has available two means of settlement: It can either make immediate payment of $1,485,000, or it can make annual payments of $195,000 for 10 years, each payment due on the last day of the year. Click here to view factor tables Which method of payment do you recommend, assuming an expected effective interest rate of 9% during the future period? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present Value of annual payments Recommended payment method $Company A agrees to enter into an FRA agreement with Company B in which Company A borrows $ 40,000,000 in 6-month time for a period of 9 months, and Company B invests $ 40,000,000 in 6-month time for a period of 9 months. The 6-month interest rate is 0.77% per annum and the 9-month interest rate is 0.89% per annum. What is the interest rate that both companies agreed upon? Suppose that at the expiry date of the FRA, the 6-month interest rate is 0.81% per annum and the 9-month interest rate is 0.96% per annum, calculate the compensatory payment and which party receives it? Su ppose that at the expiry date of the FRA, the 6-month interest rate is 0.79% per annum and the 9-month interest rate is 0.86% per annum, calculate the compensatory payment and which party receives it?
- Company A agrees to enter into an FRA agreement with Company B in which Company A borrows $ 50,000,000 in 6-month time for a period of 9 months, and Company B invests $ 50,000,000 in 6-month time for a period of 9 months. The 6-month interest rate is 0.75% per annum and the 9-month interest rate is 0.90% per annum. (i).What is the interest rate that both companies agreed upon? (ii).Suppose that at the expiry date of the FRA, the 6-month interest rate is 0.81% per annum and the 9-month interest rate is 0.96% per annum, calculate the compensatory payment and which party receives it?Company A agrees to enter into an FRA agreement with Company B in which Company A borrows $ 40,000,000 in 6-month time for a period of 9 months, and Company B invests $ 40,000,000 in 6-month time for a period of 9 months. The 6-month interest rate is 0.77% per annum and the 9-month interest rate is 0.89% per annum. Suppose that at the expiry date of the FRA, the 6-month interest rate is 0.81% per annum and the 9-month interest rate is 0.96% per annum, calculate the compensatory payment and which party receives it? Suppose that at the expiry date of the FRA, the 6-month interest rate is 0.79% per annum and the 9-month interest rate is 0.86% per annum, calculate the compensatory payment and which party receives it?Assessment Question 20, P6-58 (similar to) The present value of the contract is $ (Round to the nearest cent.) (Present value of a complex stream) Don Draper has signed a contract that will pay him $60,000 at the end of each year for the next 7 years, plus an additional $140,000 at the end of year 7. If 7 percent is the appropriate discount rate, what is the present value of this contract? > C
- Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,600,000, or it can make annual payments of $300,000 for 15 years, each payment due on the last day of the year. Instructions Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period?Problem 6: Carmen Corporation uses the installment sales method. On January 1, 2020, The corporation sold an equipment for P2,000,000 with the following terms: 30% down payment on the date of sale and the balance is payable in four equal annual installments every December 31. The cost of the equipment is P1,200,000. Ignore the concept of time value of money. Requirement: Provide the journal entries for 2020 and 2021. Show all computations in good form.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.
- a. On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February, April, June, and September, dividends are paid on the asset at a rate of 3%. In other months, dividends are paid at a rate of 2%. All dividend yields are expressed in semiannual compounding. The risk-free rate of interest over the period is 8% per annum with continuous compounding and the asset is worth $45.00 at contract initiation. What is the no-arbitrage price of the forward contract? b. What is the Convenience Yield and what does a higher or lower convenience yield reflect? c. Coming out of the COVID-19 pandemic and considering the Russia-Ukraine war, would you expect the convenience yield to lead to a normal or inverted market for oil futures prices? Explain NEED ANSWERS PLEASEa. On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February,April, June, and September, dividends are paid on the asset at a rate of 3%. In other months,dividends are paid at a rate of 2%. All dividend yields are expressed in semiannual compounding.The risk-free rate of interest over the period is 8% per annum with continuous compounding andthe asset is worth $45.00 at contract initiation.What is the no-arbitrage price of the forward contract? b. What is the Convenience Yield and what does a higher or lower convenience yield reflect? c. Coming out of the COVID-19 pandemic and considering the Russia-Ukraine war, would youexpect the convenience yield to lead to a normal or inverted market for oil futures prices?Explain. On December 31, 2020, SSNIT and SIC (non-life) entered into a six year swap arrangement with first payment to be exchanged on December 31st, 2022 and each December 31st thereafter under the following terms: SIC will pay SSNIT an amount equals to 5% per annum on a notional principal of US$50 million. (FIXED Amount) SSNIT will pay SIC an amount equals to one-year LIBOR +1.25% per annum on a notional amount of US$50 million. (Flexible Amount). On 31stDecember 2022, one-year LIBOR is projected to be 2.75%. What will be the payment flows for the first year, December 31st?