Induce a counter party to take the other side of this swap

Assignment Help Financial Management

Reference no: EM13765715

Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 10% coupon debt outstanding might like to convert to synthetic floating-rate debt by entering a swap in which it pays LIBOR and receives a fixed rate of 10%. What up-front payment will be required to induce a counterparty to take the other side of this swap? Assume notional principal is $90 million. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Reference no: EM13765715

Questions Cloud

Are we too litigious : Are We Too Litigious-We are starting our study of Torts. These are not pastries! They are "civil wrongs," for which the legal society believes payment or punishment (monetary) ought to occur

What should business managers do to protect organizations : What are some special issues that arise in Internet transactions involving contracts as compared to traditional transactions involving contracts? What should business managers do to protect their organizations in Internet transactions

Equipment is depreciated straight-line to a zero book value : Thornley Machines is considering a 3-year project with an initial cost of $1,080,000. The project will not directly produce any sales but will reduce operating costs by $640,000 a year. The equipment is depreciated straight-line to a zero book value ..

Explain what is found in cpt coding : Explain why coding properly is important to the organization and the patient - Explain what is found in CPT coding, ICD coding, and in the HCPCS.

Induce a counter party to take the other side of this swap : Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 10% coupon debt outstanding might like to co..

What emotion did you experience when listening to each piece : What emotions did you experience when listening to each piece? How did your fellow audience members respond to the music? What feedback might you give the performers about your experience?

Contrast managerial and financial accounting : Objective: Compare and contrast managerial and financial accounting

Analyze the legal issues of e-business : Your review should assess the different types of and legal protections for intellectual property - Analyze the legal issues of e-business

What is law : What Is Law? List a few of them; then answer this question: What is it that makes a law, "Law?" (Must it be obeyed to be a law, for instance?) How do we know if something is "law?

User Account

All Pages