Calculate the quality spread differential

Assignment Help Finance Basics
Reference no: EM133115907

Company Alpha is an A-rated firm desiring to issue five-year floating-rate notes (FRNs). Company Alpha finds that it can issue FRNs at six-month LIBOR + 0.125 percent or at three- month LIBOR + 0.125 percent. Given its asset structure, three-month LIBOR is the preferred index. Company Beta is a B-rated firm that also desires to issue five-year FRNs. Company Beta finds it can issue at six-month LIBOR + 1.0 percent or at three-month LIBOR + 0.625 percent. Given its asset structure, six-month LIBOR is the preferred index. Assume a notional principal of $15,000,000.

Required:

(i) Calculate the quality spread differential (QSD).

(ii) Set up a floating-for-floating rate swap where the swap bank receives 0.125 percent and the two counterparties share the remaining savings equally.

Reference no: EM133115907

Questions Cloud

How much total debt does the company have : Bike Inc's latest Earnings per share (EPS) was $2.50 its book value per share (BVPS) was $20.00, How much total debt does the company have
Illustrate with a graph and description : Illustrate with a graph and description: How would each of the following affect national saving, investment, the current account balance, and the real interest
Eligibility for payment of survivor benefits : Adam Smith is 48 years old IT consultant. He has a 47 years old wite Lisa, and three sons, Michael 24 years old, John is 22 years old and Alan 5 years old. John
Calculate the amount to be included as property : Calculate the amount to be included as property, plant and equipment in respect of the new store assuming there is an agreement to repay the loan
Calculate the quality spread differential : Company Alpha is an A-rated firm desiring to issue five-year floating-rate notes (FRNs). Company Alpha finds that it can issue FRNs at six-month LIBOR + 0.125 p
Calculate the total liabilities : Given - Account payable - 2,500, Current Debt - 3,000, Long term Debt - 25,000 and Common Stock - 31,000. Calculate the total liabilities
Identify scholarly articles and understand some of thing : Identify scholarly articles and understand some of the things you should look for while completing the assignment.
What was the firm operating cash flow or ocf : The 2014 balance sheet of Jordan's Golf Shop, Inc., showed long-term debt of $5 million, What was the firm operating cash flow or OCF
List three major us financial markets indexes : List three major U.S. financial markets indexes, explain how they are constructed, and describe how it is used - starting with the Dow Jones Industrial Average

Reviews

Write a Review

Finance Basics Questions & Answers

  Draw and label a timeline depicting the cash flows

The financial manager at Starbuck Industries is considering an investment that requires an initial outlay of $25,000 and is expected to result in cash inflows o

  Where did the women suffrage movement begin

Where did the women's suffrage movement begin? What were conditions like for women during this time (what rights were denied them)?

  Determine which items are o&m vs capital

Determine if there is any information missing. State assumptions when putting together the budget. If there is more revenue than expenses there is a surplus... if less a shortfall. Information may be missing and needs to be identified.

  Determine the sample size required

Let X1 , X2 ,... , Xn , be a random sample from a normal population, with unknown mean, and variance σ2 = 5. The population mean is to be estimated with the sample mean such that the 95% con?dence interval will be ξL ≤ μ - X¯ ξR, an interval of total..

  Issues in international accounting

The key factor of difference between the Anglo-American and continental models appears to be between capital-based financial markets and credit-based financial markets.

  Strategy or tactics applied by the company in offering it

How do you think business buyer behavior can have an impact on the strategy or tactics applied by the company in offering it?

  Project the expected standard deviation

Your management team has put together the following projections for a project that your company may be interested in implementing.

  What would your initial capital investment be

Your shoe design makes 23 pairs for every 1,000 yerds of textile. If you get an order for 500K orders of pairs, then what would your initial capital investment be?

  What is the payback period for each proposed pizza

Answer on excel:1. What is the payback period for each proposed pizza?2. What is the discounted payback period for each proposed pizza?3. What is the NPV for each proposed pizza?

  Calculate the operating breakeven point in units

The firm has annual interest charges of $6,000, preferred dividends of $2,000, and a 40% tax rate.

  Explain the rrsp and the annuity

Mrs. Corriveau has just retired at age 58 with $160,360 in her RRSP. She plans to live off other savings for a few years and allow her RRSP to continue to grow

  Determine the depreciation allowed for tax purposes

Determine the depreciation allowed for tax purposes for the 2008 tax year. The tax year runs from January to December. Ignore all Section 179 deductions.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd