Design a swap that will net a bank, acting as intermediary

Reference no: EM131404122

Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S. multinational, wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects):

Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies.

Reference no: EM131404122

Questions Cloud

Discuss about the financial management : Your rough draft should include a cover page, 8 - 10 pages of writing in the body of the paper, and a reference page. The paper should demonstrate a strong thesis about the managerial processes that must be implemented before opening day.

Necessary for a process to be considered a bernoulli process : When we are sampling without replacement, under what conditions can we assume that the constant assumption has been satisfactorily met?

Pros and cons of singular and consolidated policy format : What are the pros and cons of Singular and Consolidated policy format? Is it necessary to include standards, baselines, guidelines or procedures in this policy document? Explain your answer

What is the value of the swap to the financial institution : Payments are exchanged every year, with one exchange having just taken place. The swap will last two more years. What is the value of the swap to the financial institution? Assume all interest rates are continuously compounded.

Design a swap that will net a bank, acting as intermediary : Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies.

Determine probability that none will receive a movie coupon : For the five servers, determine the probability that none will receive a movie coupon.- two of the five will receive a coupon.

Estimate the two-and three- year libor zero rates : Tow- and three-year swap rates (expressed with annual compounding) are 11% and 12% per annum. Estimate the two-and three- year LIBOR zero rates.

How can swaps be used to offset the risk : A bank finds that its assets are not matched with its liabilities. It is taking floating-rate deposits and making fixed-rate loans. How can swaps be used to offset the risk?

Determine probability that none of andersons will be chosen : If jury members are selected at random, and the Anderson family includes three adults, determine the probability that none of the Andersons will be chosen.

User Account

All Pages