How an interest rate swap is different

Assignment Help Finance Basics
Reference no: EM133003138

G.P. Stanley is an investment bank that has a wide range of financial products on its balance sheet. In addition to G.P. Stanley's share and debt securities, it hedges its asset risk by taking various derivative products such as option, swap and futures contracts.

Q1 Given G.P. Stanley has swap contracts in the portfolios, explain how an interest rate swap is different from a long-term debt security

Q2 G.P. Stanley has a corporate client who came for a vanilla swap. The corporate client agreed to pay for a six-month BBSW on $3 million to G.P Stanley who offered a fixed interest rate of 9.5% p.a. The interest payment is settled every six months. If at the first reset date, the six-month BBSW is 8% p.a., calculate the cash payment exchanged between the two parties at the first reset date.

Reference no: EM133003138

Questions Cloud

What is the value of the assets required by the debt : The market value of the assets of a corporation is currently $290.0 million but the owners wish to only use as collateral a value that will result in an interes
Estimate the? firm current share price : Hardy Enterprises expects this? year's earnings of $4.31 per share and has a 50% retention? rate, which it plans to keep constant.
Compute the value of a six-month european call option : 1. A stock price is currently 43. It is known that at the end of six months it will be either 47.73 or 39.56. The risk-free interest rate is 4% per annum with c
What is the maximum price of a home : What is the maximum price of a home you can afford if your maximum monthly payment is $1,287.43, in a traditional 30 year mortgage with a fixed 2.535% APR compo
How an interest rate swap is different : G.P. Stanley is an investment bank that has a wide range of financial products on its balance sheet. In addition to G.P. Stanley's share and debt securities, it
Explain the information role of a stock exchange : Altimate Ltd. is a private company that has been very successful over the past ten years. The CEO and the large shareholders of the business decide to go throug
Problem of musharakah mutanaqisah partnership : The following information related to the problem of Musharakah Mutanaqisah Partnership (MMP)
How much is the equity in company a worth : You have valued Company A using consolidated financials for $1B (using FCFF and WACC) and that the firm has $200M in debt. Company A owns 60% of Company C and t
Explain why an american option is always worth : Explain why an American option is always worth at least as much as a European option on the same asset with the same strike price and exercise date.

Reviews

Write a Review

Finance Basics Questions & Answers

  Solve the given cutting stock problems

(Borrowed and adapted from a report written by M. H. Belz and A. G. Doig for Australian Paper Manufacturers Ltd.) Solve the following cutting stock problems.

  Comprehensive policy to overcome challenges

You are a market veteran and have planned to introduce a mutual fund in Bangladesh. What are the structural challenges of both open-end and closed-end

  Determine the present value of the offers

Determine the present value of each of the three offers and then show which one has the highest present value.

  What are the value of the futures and the value of forward

What are the value of the futures and the value of the forward when the futures price and the forward price both increase to 1.6040?

  Hadlock industries cash flow

Determine Hadlock Industries' Cash Flow from Financing for the year ending 6/30/2011

  A 1000 par bond with an annual coupon has only 1 year

a 1000 par bond with an annual coupon has only 1 year until maturity. its current yield is 6.713 and its yield to

  Problem regarding the call provision

A company is contemplating a long-term bond issue. It is debating whether to include a call provision. What are the benefits to the company from including a call provision? What are the costs?

  What insurance coverage bob and barbara parker need

What should the Parkers consider when deciding what insurance coverage they need? Do they have sufficient insurance coverage? If not, what type of insurance coverage do you recommend for them?

  Difference between market return and risk-free rate

Suppose CAPM works, and you know that the expected returns on Google and IBM are estimated to be 12.75% and 9.25%, respectively. You have just calculated

  Analyze the adjusted present value methodology

Analyze the adjusted present value (APV) methodology and make at least one recommendation for improvement. Explain your rationale. Create 2 to 3 best practices that any multinational corporation could apply to multinational cash management.

  Problem regarding the tootsie roll industry

Focus on the Balance Sheet, which Tootsie Roll Industries Inc. titles Consolidated Statements of Financial Position, and the notes following the financial statements. Answer the following questions in a clear and concise, professional business rep..

  Military radar and missile detection systems are designed

military radar and missile detection systems are designed to warn a country of enemy attacks. a reliability question

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