The Dynamic Group, a private equity firm headquartered in Miami, Florida (US), borrows £5,000,000 for one year at 7 interest. What is the dollar cost of this debt if the pound depreciates from $2.0260/E to $1.9310/£ over the year? O2.32% OJEK
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- The current value of a firm is $1,400. Te firm has $1,000 in pure debt due in one year and the risk-free rate is 6%. The firm's asset will be worth either $1,200 or $1,500 in one year. What is the interest rate on the debt? A. 6.0% B. 7.0% C. 7.5% D. 11.0% E. 13.0%Suppose that the 60-day LIBOR is 5%. The investor is based in London and need to borrow $10,000,000 for 60 days. What is the total amount that the investor will owe in 60 days? a.Php10,083,333.33 b.Php9,916,666.67 c.Php9,833,333.33 d.Php10,333,333.33GBA Company wishes to raise $5,000,000 with debt financing. The funds will be repaid with interest in 1 year. The treasurer of GBA Company is considering three sources: i. Borrow USD from Citibank at 1.50% ii. Borrow EUR from Deutsche Bank at 3.00% iii. Borrow GBP from Barclays at 4.00% If the company borrows in euros or British pounds, it will not cover the foreign exchange risk; that is, it will change foreign currency for dollars at today’s spot rate and buy foreign currency back 1 year later at the spot rate prevailing then. The GBA Company has no operations in Europe. A representative of GBA contacts a local academic to provide projections of the spot rates 1 year in the future. The academic comes up with the following table: Currency Spot Rate Projected Rate 1 Year in the Future USD/GBP 1.5 1.55 USD/EUR 0.95 0.85 What is the expected interest rate cost for the loans in EUR and GBP?
- The assets of a bank consist of $300 million of loans to A-rated corporations with the principals being repayable at maturity. The Probability of Default for the corporation is estimated as 0.4% per year. The loan maturities are three years and the LGD is 45%. 1. What is the total risk-weighted assets for credit risk under the Basel II advanced IRB approach? 2. How much Tier 1 and Tier 2 capital is required?Q. Emmar Industries borrows $800 million at an interest rate of 7.6%. Emmar will pay tax at an effective rate of 35%. What is the present value of interest tax shields if?(a.) It expects to maintain this debt level into the far future?(b.) It expects to repay the debt at the end of 5 years?(c.) It expects to maintain a constant debt ratio once it borrows the $800 million and rassets =10%?Q7: A company borrows US dollars at 5.1% for 183 days and then at maturity refinances the principal and interest at 5.3% for a further 92 days. What is the simple cost of borrowing over the 9 months?
- Suppose NewBank decides to invest $273 million in30-day T-bills. The T-bills are currently trading at$4,981 (including commissions) for a $4,940 face valueinstrument. How many T-bills do they purchase? Whatdoes the balance sheet look like?TBTF Bank makes a 7 year interest only loan to AFC Inc of $4,300,000.00. The interest rate on the loan is i(4) = 8.125%, and the payments will be made annually. TBTF reinvests the payments at an interest rate of i(4) = 5.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 8.012% O b. 7.778% O c. 7.856% O d. 7.545% O e. 7.701%2. An investor borrows $2m from XYZ Bank at LIBOR-90 plus a quoted margin of 2%. If the LIBOR-90 effective for the 90-day loans equals 5%, the amount of interest that the investor will pay XYZ Bank is closest to: A. $140,000 B. $35,000 C. $65,000
- 6. Your firm, ABC Berhad, has a payable account amount of SGD1,000,000 in 3 months. Your company is considering hedging the cash flows. Your firm analysts prepare the following information. : MYR3.0950/SGD; MYR3.0960/SGD : 100;200 Spot rate 90-day forward rate 90-day interest rate in Malaysia : 8%; 9% per annum 90-day interest rate in Singapore : 3%; 4% per annum 90-day options : Exercise price: MYR3.0952 (Call premium: MYRO.0350/SGD; Put premium: MYRO.0450/SGD) Scenario First Second Third Table 1: Forecasted future spot exchange rate in 90 days Forecasted future spot exchange MYR3.0950/SGD MYR3.0952/SGD MYR3.1000/SGD a. If your firm decides to hedge the foreign exchange risk exposure, state the strategy you will use for the following alternative strategies: 1 a forward hedge il. an option hedge b. Calculate the expected net value in Malaysian Ringgit (MYR) of your firm cash flow in 3 months for each of the possible future spot rates as in Table 1 for each alternative strategy in (a).…XXX, Inc. finances tis seasonal working capital need with short-term bank loans. Management plans to borrow $65,000 for a year. The bank has offered the company a 3.5 percent discounted loan with a 1.5 percent origination fee. What are the interest payment and the origination fee requiered by the loan? What is the rate of interest charged by the bank?A firm borrows $200,000 at 10 percent from a bank with a compensating balance of 20 percent. What is the effective rate of interest if the loan is discounted and the principal is repaid at the end of one year? 15.28% 16.28% 17.28% 14.28% 19.55%