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1. The Bank of Toronto has negotiated a plain vanilla swap in which it will exchange fixed payments of 10 percent for floating payments equal to LIBOR plus 0.5 percent at the end of each of the next three years. In the first year, LIBOR is 8 percent; in the second year, 9 percent; in the third year, LIBOR is 7 percent. What is the total net payment the Bank of Toronto makes over the three-year period if the notional principal is $10 million?
2. Assume that the First Bank of California (FBC) has rate-sensitive liabilities and rate-sensitive assets. If FBC negotiates a rate-capped swap, its _________ payments will be capped, and it will _________ an up-front premium in exchange for the cap.
outflow; pay
inflow; pay
outflow; receive
inflow; receive
Assume a healthcare organization is analyzing a capital investment project with greater risk than that of the organization’s average project. Which of the following cost of capital alternatives would be most appropriate for analyzing the project’s ne..
Zeniba Inc.’s stock is currently selling for $23.56 per share. The company just paid a dividend = $2.00 per share (i.e., D0 = $2.00), and investors expect the dividend to grow at a constant rate out into the future. Investors require a minimum annual..
Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. If rates were to suddenly fall by 2 percent instead, what wou..
Which of the following is true of companies that base their business on the marketing concept?
Investment banking has changed dramatically. Some key players either went bankrupt or were bought out. The remaining two investment banks had to apply to become bank holding companies. However, the industry experienced something of a comeback. Goldma..
Compute ROE (return of equity) of this publically traded company using DuPoint equation.
Assume that as of today, the annualized interest rate on a three-year security is 10 percent, while the annualized interest rate on a two-year security is 6 percent. Use this information to estimate the one-year forward rate two years from now
Fieldspring’s city manager of public works has been reviewing flood data for his city and has determined a certain pattern to the associated costs.
Calculate the required rate of return on a security with a beta of 1.15.
What amount will be in your account at the end of 4 years? What amount will be in your account after 4 years?
The personal tax rate on debt is 21% and the personal tax on equity is 10%. The corporate tax rate is 16%. There is a firm, initially with no debt and market value $3 billion. This firm decides to issue $200 million of perpetual risk-free debt paying..
The State News had net income of $357 of which 40% was distributed to shareholders as dividends. During the year, the company issued new common stock, amounting in $93. What is the cash flow to stockholders?
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