Thank you! Yosemite Corporation has an outstanding debt of $10.2 million on which it pays a 7 percent fixed interest rate annually. Yosemite justmade its annual interest payment and has three years remaining until maturity. Yosemite believes that interest rates will fall over thenext three years and that floating-rate debt will allow it to reduce its overall borrowing costs. A bank offers Yosemite a three-yearinterest rate swap with annual payments in which Yosemite will pay LIBOR, currently at 5.9 percent, and receive a 5.4 percent fixedrate on $10.2 million notional principal. Suppose that LIBOR turns out to be 5.3 percent in one year and 5 percent in two years.Including interest payments on Yosemite's outstanding debt and payments on the swap, what will be Yosemite's net interest paymentsfor the next three years?Note: Negative values should be indicated by parentheses.Year 1Year 2Net InterestPaymentsYear 3

Net Interest PaymentsYear 1$0.76 millionsYear 2$0.70 millionsYear 3$0.68 millionsExplanation:Step…

Answered: Yosemite Corporation has an outstanding…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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Victory Markets, LLC ("VML") has a bank loan with a total principal of $3,800,000. The stated annual interest rate for the loan is 8.40%, and the loan is to be amortized with monthly payments over 6 years. VML wants the bank to change the provisions of the loan such that payments are made on an annual basis. What would be the economically equivalent annual interest rate (i.e., economically equivalent to 8.40% compounded monthly) for a loan with annual payments? 8.6632% 8.7311% 9.0023% 8.5987%
Birchcreek Construction has three payments left on a debt obligation in the amounts of $5,500, $10,250, and $8,000 due 1.5 years, 2 years, and 3.5 years from today. Prevailing interest rates are projected to be 8% compounded quarterly in the first year and 8.25% compounded semi-annually thereafter. If Birchcreek wants to settle the debt today, what amount should the creditor be willing to accept?
X has a 3 million dollar floating rate loan which is re-set every six months. The company wants to protect itself against a rising interest rate in the next six months. It purchases a 3% 6 v/s 12 Forward Rate Agreement ( FRA ) on a notional amount of 3 million dollar. At the start date of the FRA, the market interest rate on floating rate debt is 3.5 % per annum. (i) Calculate the amount receivable by X from the writer of the FRA at the beginning of the FRA period, assuming 30-day months in a year.(ii) Calculate the interest payable by X to the providers of finance at the end of month 12. (ii) Calculate the actual interest cost of the loan and justify your answer.
Taggart Transcontinental currently has a bank loan outstanding that requires it to make three annual payments at the end of the next three years of $1,000,000 each. The bank has offered to allow Taggart Transcontinental to skip making the next two payments in lieu of making one large payment at the end of the loan's term in three years. If the interest rate on the loan is 6%, then the final payment that the bank will require to make Taggart Transcontinental indifferent between the two forms of payments is closest to:
New Town Bank offers you a line of credit of $50,000 with an interest rate of 2.1 percent per quarter. The loan agreement also requires that 2.5 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. Short-term investments are currently paying .68 percent per quarter. What is the effective annual interest rate on the line of credit if you borrow the entire amount for one year? Assume any funds borrowed or invested use compound interest. O 8.40 percent 8.89 percent Q 8.67 percent O 8.51 percent O 8.62 percent
Ranger Enterprises is considering pledging its receivables to finance a needed increase in working capital. Its commercial bank will lend 70 percent of the pledged receivables at 2.5 percentage points above the prime rate, which is currently 10 percent. In addition, the bank charges a service fee equal to 2 percent of the pledged receivables. Both interest and the service fee are payable at the end of the borrowing period. Ranger’s average collection period is 55 days, and it has receivables totaling $7 million that the bank has indicated are acceptable as collateral. Calculate the annual financing cost for the pledged receivables. Assume that there are 365 days per year. Round your answer to two decimal places. %
A lender makes a 10 year loan of 120,000 which is to be paid by level payments at the end of each month. The interest rate for the initial loan is 6 percent, nominal. After the 4'th year (48'th payment), the loan is sold to another investor, who wishes to make 3 percent interest (annual effective) off of the investment. But the borrower's payments remain the same. What is the selling price?
A borrower and lender negotiate a $20,000,000 interest-only loan at a 5 percent interest rate for a term of 15 years. There is a lockout period of 10 years. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintenance fee (YMF) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 150 basis points (1.50%) will be added to determine the lender’s reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender’s reinvestment rate. Required: a. How much will the YMF be if the loan is repaid at the end of year 13 if two year treasury rates are 2 percent? If two-year treasury rates are 4 percent, what will be the lender's reinvestment rate?
A borrower and lender negotiate a $20,000,000 interest-only loan at a 5 percent interest rate for a term of 15 years. There is a lockout period of 10 years. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintenance fee (YMF) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 150 basis points (1.50%) will be added to determine the lender’s reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender’s reinvestment rate. Required: a. How much will the YMF be if the loan is repaid at the end of year 13 if two year treasury rates are 2 percent? If two-year treasury rates are 4 percent, what will be the lender's reinvestment rate? (Do not round intermediate calculations. Round "YMF" to the nearest dollar amount and "Reinvestment rate"…
A borrower and lender negotiate a $25,000,000 interest-only loan at an 8.0% interest rate for a term of 15 years. There is a 10 year lockout period. Should the borrower choose to prepay this loan at any time after the 10th year, a yield maintenance fee (YMF) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 180 basis points (1.80%) will be added to determine the lender’s reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender’s reinvestment rate. If the loan is repaid at the end of the 12th year, and 3-year treasury rates are 5.0%, what is the YMF? $797,795 $341,336 $547,229 $633,272
A borrower and lender negotiate a $38,000,000 interest-only loan at a 6.0 percent interest rate for a term of 15 years. There is a lockout period of 10 years. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintenance fee (YMF) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 150 basis points (1.50%) will be added to determine the lender's reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender's reinvestment rate. Required: a. How much will the YMF be if the loan is repaid at the end of year 13 if two year treasury rates are 3 percent? If two-year treasury rates are 5.0 percent, what will be the lender's reinvestment rate? Note: Do not round intermediate calculations, Round "YMF" to the nearest dollar amount. Enter…
Xu Salon has a line of credit of $150,000 with an interest rate of 1.625 percent per quarter. The credit line requires that 2.25 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. Xu Salon's short-term investments are earning .35 percent per quarter. If the line of credit goes unused all year, what is the effective annual interest rate on this arrangement? Assume any funds borrowed or invested use compound interest. Give typing answer with explanation and conclusion

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