User Account

All Pages

Determine the fair value of the derivative

Assignment Help Cost Accounting
Reference no: EM13519283

Assume an interest rate swap with a notional value of $1,000,000. Firm A receives fixed and pays variable. The fixed rate on December 31, 2000, is eight percent. The swap has two years to run with variable interest rates of 7.8 percent and 7.6 percent expected on December 31, 2001, and 2002, respectively (annual settlements are assumed for simplicity). Firm A's discount rate is eight percent.

Required:

a. Determine the fair value of the derivative and state whether it would be an asset or a liability.

b. Assume that the swap occurred prior to December 31, 2000, and the interest rate swap contract had a debit balance of $1,000. Under this circumstance make the entry for the fair value as of December 31, 2000.

Reference no: EM13519283

Questions Cloud

Define the higher standard molar entropy : In each of the following pairs, which compound would you expect to have the higher standard molar entropy: (a) C2H2(g) or C2H6(g); (b) CO2(g) or CO(g)? Show with appropriate use of degrees of freedom equations.
Find with what velocity did the glass leave the table top : A glass slides across a table top, goes off the edge, and falls onto the floor below. The table is 0.860 m high and the glass lands 1.82 m from th eedge? With what velocity did the glass leave the table top
Explain what is the reducing or oxidizing agents : Complete and balance this equation (show all work clearly, particularly each 1/2 reaction). What is the reducing or oxidizing agents - label each
Evaluate the caps argument involving situations : Evaluate the CAPs argument involving situations where market value of common stock should be capitalized in certain stock dividend situations.
Determine the fair value of the derivative : Determine the fair value of the derivative and state whether it would be an asset or a liability - Under this circumstance make the entry for the fair value as of December 31, 2000.
Find out the age of the artifact : A wooden artifact from a Chinese temple has a 14C activity of 34.3 counts per minute as compared with an activity of 58.2 counts per minute for a standard of zero age. From the half-life for 14Cdecay, 5715 yr determine the age of the artifact.
Obtain the speed of a point on the edge of the wheel : A ferris wheel at a local carnival has a radius of 20.0 m and it completes one revolution in 9.60 seconds. What is the speed of a point on the edge of the wheel
Determine the income and unrealized holding gain : Determine the income and unrealized holding gain components for the years 2000 through 2004 (assume that the interest rate change occurs on each December 31).
Explain what is the concentration of cu2+ at equilibrium : A .25-mole quantity of CuSO4 is added to a liter of 1.0 M NH3 solution. What is the concentration of Cu2+ at equilibrium. [The formation constant for Cu(NH3)4 is Kf=5.0e13]

Reviews

Write a Review

Cost Accounting Questions & Answers

  How much was manufacturing overhead

Equivalent units for conversion costs for the month in the first processing department - cost per equivalent unit for materials for the month in the first processing department is closest to

  How many jet skis did allyson sell during the year

Allyson Ashley makes jet skis. During the year, Allyson manufactured 54,000 jet skis. Finished goods inventory had the following units.

  Why are noncash transactions

Why are noncash transactions, such as the exchange of common stock for a building, included on a statement of cash flows? How are these noncash transactions disclosed?

  Corporate accounting assignment

Write a report the owners detailing ALL the different options and considerations that you feel the owners should consider raising the $60 million.

  How individual remuneration packages of executives

The potential forms of ex-post opportunistic behaviour that managers may still engage in despite the existence of performance contracts?

  What is the value of these bonds

What is the value of these bonds when the required interest rate is 5 percent, 10 percent, and 15 perrcent and why is the price of Bond L more sensitive to interest rate changes than the price of Bond S?

  Revaluation of assets and impairment of assets

What is the difference between revaluation of assets and impairment of assets - account managerial as well as accounting implications.

  Compute the total cost of borrowing for these bonds

Pueblo Company issued $300,000 of 5-year, 8% bonds at 98 on January 1, 2014. The bonds pay interest twice a year.

  Q spoiled baby corp sells baby buggies and has started an

q spoiled baby corp sells baby buggies and has started an equipment replacement project. you are needed to evaluate the

  Questionrailway company a has 1000 miles of get that extend

questionrailway company a has 1000 miles of get that extend from location a to location b. railway company a adopted

  Compute a balance sheet for the highlanders as of today

What is a typical range in annual costs contributed by Jake into this hobby of performing with the Highlanders and compute a balance sheet for the Highlanders as of today. (Assume December 31, 20x0 for today's date.)

  Java source inc jsi is a processor and distributor of a

java source inc. jsi is a processor and distributor of a variety of blends of coffee. the company buys coffee beans

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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