Determine your annualized return on the loan

Reference no: EM131290689

You are a funds manager for a large bank. On April 15, your bank lends a corporation $35 million, with interest payments to be made on July 16, October 15, January 16, and next April 16. The amount of interest will be determined by LIBOR at the beginning of the interest payment period. On April 15, LIBOR is 8.0 percent. Your forecast is for declining interest rates, so you anticipate lower loan interest revenues. You decide to buy an interest rate floor with a strike set at 8 percent and a premium of $60,000. Determine the cash flows associated with the loan if LIBOR turns out to be 7.9 percent on July 16, 7.7 percent on October 15, and 8.1 percent next January 16. The payoff is based on the exact number of days and a 360-day year. If you have a financial calculator or spreadsheet with an IRR function, determine the internal rate of return and annualize it to determine your annualized return on the loan

Reference no: EM131290689

Questions Cloud

What does that tell us about how to price the options : If these two options have the same payoffs, what does that tell us about how to price the options?

Evaluate the risk monitoring and control tools-techniques : Part 1: Research and evaluate the risk monitoring and control tools or techniques. In 3-4 pages, you will describe each tool or technique, evaluate it, and describe how you would integrate the tool or technique into your plan. These tools and tech..

Employee participation for one of proposed retirement plans : In addition to the proposal, management has asked you to design a communication plan that encourages employee participation for one of the proposed retirement plans.

What is the expected time for activity h : What is the expected (estimated) time for activity H? What is the variance for activity H? Based on the calculation of estimated times, what is the critical path? What is the estimated time of the critical path?

Determine your annualized return on the loan : The payoff is based on the exact number of days and a 360-day year. If you have a financial calculator or spreadsheet with an IRR function, determine the internal rate of return and annualize it to determine your annualized return on the loan

List three skus that were purchased most frequently together : List the SKU which was purchased the most. List the three SKUs that were purchased most frequently together. List the four SKUs that were purchased most frequently together.

Issue among the immigrants in minnesota : Differences existed in the social practices of the ethnic groups and Inheritance of land was a cultural customs and was governed by isolation by each ethnic groups.

Determine the annualized loan rate for libors : Determine the annualized loan rate for LIBORs of 6.5 percent and 12.5 percent. Assume the payoff is based on 90 days and a 360-day year. The current LIBOR is 9.5 percent.

Determine the effective cost of borrowing : The payoff is based on the exact number of days and a 360-day year. If you have a financial calculator or a spreadsheet with an IRR function, solve for the internal rate of return and annualize it to determine the effective cost of borrowing.

User Account

All Pages