Reference no: EM1367621
1. At present, LIBOR3 is 7.93% and LIBOR6 is 8.11%. What is the forward rate for a LIBOR3 deposit to be placed in three months?
2. Corporation A, a low rated company, desires a fixed-rate, long term loan. A currently has access to floating interest rate amount at a margin of 1.5 percent over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, company B, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at 11% and floating-rate funds at LIBOR + ½ %.
a. How can A and B use a swap to advantage?
b. Suppose they split the cost savings. How much would A pay for its fixed-rate funds? How much would B pay for its floating-rate funds?
3. Nestle rolls over a $25 million loan priced at LIBOR3 on a three-month basis. The company feels that interest rates are rising and that rates will be higher at the next roll-over date in three months. Suppose the current LIBROR3 is 5.4375%.
a. Explain how Nestle can use an FRA at 6% from Credit Suisse to reduce its interest rate risk on this loan.
b. In three months, interest rates have risen to 6.25%. how much will Nestle receive/pay on its FRA? What will be Nestle's hedged interest expense for the upcoming three-month period?
4. Suppose that IBM would like to borrow fixed-rate yen, whereas Korea Development Bank (KDB) would like to borrow floating-rate dollars. IBM can borrow fixed-rate yet at 4.5% or floating rate dollars at LIBOR +0.25%. KDB can borrow fixed-rate yen at 4.9% or floating -rate dollars at LIBOR +0.8%.
a. What is the range of possible cost savings that IBM can realize through an interest rate/currency swap with KDB?
b. Assuming a notional principal equivalent to $125 million, and a current exchange rate of 105 yen/dollar, what do these possible cost savings translate into in yen terms?
c. Redo parts a and b assuming that the parties use Bank of America, which charges a fee of 8 basis points to arrange the swap.
Conduct of monetary policy
: Describe how does choice of an exchange rate regime alter conduct of monetary policy. In addition, please also explain when it tend to increase the power of the monetary authorities and when to decrease their power.
|
Write a program that exploit string library functions
: Write a program that exploit string library functions to do the following: -prompt the user to enter his name (of four parts) -count the number of characters in his name (excluding the white spaces).
|
Conclude what factors drive its demand for mba student
: Assume MTSU is attempting to conclude what factors drive its demand for MBA student credit hours (dependent variable). Information is available on following independent variables:
|
Argue that the problem is np complete
: Argue that the following prob is NP Complete. Given list of positive integers, u1,u2,...un (in binary representation) and asked if there is partition of this set into 3 subsets, each of which has same sum.
|
Calculating the forward rate
: Corporation A, a low rated company, desires a fixed-rate, long term loan. A currently has access to floating interest rate amount at a margin of 1.5 percent over LIBOR.
|
Compute the shortest path
: Use Dijkstra's shortest-path algorithm to compute the shortest path from x to all network nodes - computes their Distance Vector for network
|
Estimate cost elasticity of demand for education
: Estimate cost elasticity of demand for education at this university. Is cost elasticity of demand for university tuition elastic or inelastic according to answer in part (i) Why.
|
How much time is necessary for a particle of string
: A Carnot engine performs work at the rate of 380 kW when using 730 kcal of heat per second. If the temperature of the heat source is 560 C, at what temperature is the waste heat exhausted.
|
Which airline has lower costs
: If Fly Right were to go out of business, it would be able to rent its plane to another airline for $30,000. Which airline has lower costs.
|