X and Y are offered the rates (per annum) below on a $5 million 10-year investment. X needs fixed rate and Y needs floating rate investment. fixed(%) float(%) X 8.0 libor Y 8.8 libor In a swap with a broker who nets 0.2% and is equally attractive to X and Y, X enters a swap with the broker that (a) pays fixed rate 8.3% (b) pays fixed rate 8.5% (c) receives fixed rate 8.3% (d) receives fixed rate 8.5% (e) receives libor
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X and Y are offered the rates (per annum) below on a $5 million 10-year investment. X needs fixed rate and Y needs floating rate investment. fixed(%) float(%) X 8.0 libor Y 8.8 libor In a swap with a broker who nets 0.2% and is equally attractive to X and Y, X enters a swap with the broker that
(a) pays fixed rate 8.3%
(b) pays fixed rate 8.5%
(c) receives fixed rate 8.3%
(d) receives fixed rate 8.5%
(e) receives libor
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- Counterparty A can borrow from the floating rate market at LIBOR + 0.5% and Counterparty B can borrow from the Eurobond market at 7%. If Counterparty A pays 7.35% into the swap and Counterparty B pays the LIBOR rate plus 0.5% into the swap, then the overall cost to borrow by Counterparty B is: a. 7.85% b. LIBOR + 0.5% С. 7% d. LIBOR + 7.5% е. 7.35%Company A can borrow money at a fixed rate of 9 percent or a variable rate set at prime plus 1 percent. Company B can borrow money at a variable rate of prime plus 2 percent or a fixed rate of 8.25 percent. Company A prefers a fixed rate and company B prefers a variable rate. 1. Compute the potential gain for the concerned parties through the swap deal.Two companies, Company A and Company B, are looking to enter into an interest rate swap agreement. Company A Company B Fixed rate 5% 6% Floating Rate 3-month LIBOR plus 1% 3-month LIBOR plus 1.5% Suppose that company A requires a floating-rate borrowing and company B requires a fixed- rating borrowing. A financial institution is planning to arrange a swap and requires 20bps spread. If benefits are equally shared both companies, what rate of interest will A and B pay?
- Company A can borrow money at a fixed rate of 9 percent or a variable rate set at prime plus 1 percent. Company B can borrow money at a variable rate of prime plus 2 percent or a fixed rate of 8.25 percent. Company A prefers a fixed rate and company B prefers a variable rate. A swap dealer can bring them together for a commission of 1% on the swap deal. 1. Show a swapping arrangement, ensuring that both Company A and B are better off and the swap dealer gets the 1% cut.Company X and Company Y have been offered the following rates for a 10 million dollar investment. Fixed Rate Floating Rate Company X 3.5% 3-month LIBOR plus 10bp Company Y 4.5% 3-month LIBOR plus 30bp Suppose that Company X invests floating and company Y invests fixed. If they enter into a swap with each other where the apparent benefits are shared equally, what is the interest rate that company Y will get after entering the swap? 3-month LIBOR-10bp 3.9% 3-month LIBOR+70bp 4.9%X and Y are offered the rates (per annum) below on a $5 million 10-year investment. X needs fixed rate and Y needs floating rate investment. fixed (%) float (%) X 8.0 libor Y 8.8 libor
- 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 Question 6 options: L+ 0.1% L+ 0.2% L+ 0.3% L+ 0.5%ABC can borrow at either a fixed rate of 11% or a floating rate of LIBOR + 1% XYZ can borrow at either a fixed rate of 10% or a floating rate of LIBOR + 3% The swap dealer can help them meet and negotiate for a fee of 2% of the deal Question: Construct a mutually beneficial swapping arrangement if ABC and XYZ decide to share the available QSD equally and show that the dealer is satisfied with the deal as well.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%
- (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.7.18. Companies X and Y have been offered the following rates per annum on a $5 million 10-year investment: Fixed rate Floating rate Company X Company Y 8.0% 8.8% LIBOR LIBOR Company X requires a fixed-rate investment; company Y requires a floating-rate investment. Design a swap that will net a bank, acting as intermediary, 0.2% per annum and will appear equally attractive to X and Y.A forward swap involves the exchange of interest payments that do not begin until a specified future time. Which of the following is an example of a forward swap? a. a company paying a variable rate of interest may swap its interest payments with another company that will then pay the first company a fixed rate. b. If the fixed rate is 4.5% and interest rates on similar derivatives with similar maturities fall to perhaps 3.5%, the fixed-rate payer might call the swap to refinance at that lower rate. c. if a stock price was sitting at $50 per share and you wanted to buy a call option on it for a $45 strike price at a $5.50 premium (which, for 100 shares, would cost you $550) you could also sell a call option at a $55 strike price for a $3.50 premium (or $350), thereby reducing the risk of your investment. d. Company ABC's shares trade at $60, and a call writer is looking to sell calls at $65 with a one-month expiration. If the share price stays below $65 and the…