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Boeing has entered into a 10 year interest rate swap with Bank America with a notional principal of $500 million. Boeing has agreed to pay LIBOR – the floating rate side of the swap. Bank America has agreed to pay a fixed rate of 7%. Assume that next year, LIBOR is 7.5%. The net payment at that date will be:
a. Boeing pays Bank America $502,500,000
b. Boeing pays Bank America $2,500,000
c. Bank America pays Boeing $25,000,000
d. Boeing pays Bank America $3,750,000
e. Bank America pays Boeing $2,500,000
A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000. What is the change in the price of this bond (give me a percentage change) if the market yield rises to 6% from the current yield of 4.5%?
What is the relationship between present value and future value? What is the difference between an ordinary annuity and an annuity due? Give examples of each.
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New Business is just being formed by 10 investors, each of whom will own 10% of the business. The firm is expected to earn $1,000,000 before taxes each year. The corporate tax rate is 34% and the personal tax rate for the firm's investors is 35%.
For the first time in a very long time, the concept of financial risk and risk management has become a topic of concern at Presidential press conferences. Such concern has centered on esoteric financial products such as derivatives that are used to m..
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