Use the following information for the next two questions. Firms X and Y have the following borrowing costs: Company X Company Y Fixed-Rate Borrowing Costs Floating-Rate Borrowing Costs 9.5% 7.5% LIBOR +1.25% LIBOR A swap bank offer the following quote for an interest only swap: 7.1-7.6 (against LIBOR) 1) X wants a fixed loan. What would be their all in cost if instead of getting a fixed loan directly they initially get a floating loan and swap it using the above quote? a. 8.5% b. 8.85% C. 8.95% d. 8.65% e. None of the above

A firm can issue one of the listed products and convert them into the floating rate using IR swaps (LIBOR for 3.7% fixed). What is the lowest floating rate that the firm can get?   Fixed rate note: 4%   Simple FRN: L + 0.5%   Inverse floater: 7.6% - L   (e.g., if we can pay only L + 0.1% that would be great, but can we obtain such a low rate?)   a.) L + 0.1%   b.) L + 0.2%   c.) L + 0.3%   d.) L + 0.5%

Company H is a high credit-worthy borrower. Company L is a low credit-worthy borrower. Their preference, status, and borrowing opportunities are shown below: Company Preferred Currently Floating Rate Borrowing Cost Fixed Rate Rate Borrowing at. Borrowing Cost H. Floating Fixed 4.25% PRIME Fixed Floating 6.25% PRIME + 0.50% Suppose the OSD is equally shared between H, L and the swap dealer. If the swap dealer receives PRIME from H, what should the swap dealer pay to H? O Prime- 0.75 % O Prime + 0.33% 4.25% 4.75%.

9) Find the maximum value of no arbitrage forward bid price and the minimum value of no arbitrage forward ask price by using the following information. Interest rates: = 7% for borrowing 2% for borrowing ¡USD iJPY Exchange rates: Spot Forward BID 0.0110 USD/JPY Fb = ? 6% for lending 1% for lending ASK 0.0125 USD/JPY Fa = ?

(Following Rates are Quoted)     Company A Company B Credit Rating A B Fixed Rate 6% 8% Floating Rate LIBOR+1% LIBOR+1.5%   Which company has a relative advantage and in which market? Which company has an absolute advantage and in which market Company A wants to borrow floating. Company B wants to borrow fix. Build a proper SWAP that benefit the two companies.

Question 5.A bank has borrowing needs at timeT >0. Show that by combining an FRAtrade today with a libor loan at timeT, the bank can today lock in its interest cost forthe periodTtoT+α. Does the borrowing bank need to buy or sell the FRA to do this?What is the fixed rate that the bank locks in?

6. Calculating simple interest and APR on a single-payment loan You are taking out a single-payment loan that uses the simple interest method to compute the finance charge. You need to figure out what your payment will be when the loan comes due. The equation to calculate the finance charge is: FsFs = P     r       t   In the equation, FsFs is the finance charge for the loan. What are the other values? P is the    amount of the loan.   r is the stated    rate of interest.   t is the term of the loan in    .   You’re borrowing $4,000 for a year and a half with a stated annual interest rate of 10%. Complete the following table. (Note: Round your answers to the nearest dollar.)

Derive the inverse relationship between Price and Yield in debt markets using a property-based example where the market price doubles in value but ultimately falls by one third of the initial price and where the initial rental yield is 6%. Include an explanation or commentary along with your calculations and proof.

Consider a loan repayment plan described by the following initial value problem, where the amount borrowed is B(0) = $40,000, the monthly payments are $600, and B(t) is the unpaid balance of the loan. Use the initial value problem to answer parts a through c. B' (+) =0.03B - 600, B(0) = 40,000 a) Find the solution of the initial value problem and explain why B is an increasing solution. B(t) = Why is B an increasing function? O A. The function is increasing because it is an exponential function with a positive coefficient and a negative exponent. O B. The function is increasing because it is an exponential function with a positive coefficient and a positive exponent. O C. The function is increasing because it is an exponential function with a positive exponent. O D. The function is increasing because it is an exponential function with a positive coefficient. b) What is the most that you can borrow under the terms of this loan without going further into debt each month? The…

2. Denote by Cn and P calls and puts with strike price K 240 and exercise date N = 1. Let the bank account be Bn = e", with r = 0.05 and let the underlying cost So = 250. Assume that Co 75 and Po = 70. Check whether NA holds. If NA does not hold, propose an %3D arbitrage strategy.