Use interest rate swap to create net fixed rate on the debt

Assignment Help Financial Management

Reference no: EM131297397

Stagecoaches, Inc. has $100,000,000 in 5-year floating rate debt with an interest rate of LIBOR + 3.0% and quarterly payments.

Describe how the firm can use an interest rate swap to create a net fixed rate on the debt.

Given the current fixed-rate on a 5-year swap, what is the company's net fixed rate (including the swap)?

Build a spreadsheet to show that the firm's net interest payment remains constant when LIBOR changes.

Reference no: EM131297397

Questions Cloud

Determine cash surplus and shortages for each month : This assignment will require you to prepare the cash budget and determine the cash surplus and shortage each month. The management estimates total sales for the period January through July based on actual sales from the immediate past quarter. Determ..

Discuss the financial statements the jobs act requires : What is the market value of a standard interest rate swap when it is created and why does the market value of the swap change over time? Identify two financial intermediaries? What are there functions? What are their major roles in the economy? Discu..

What was the net income of company : A company paid out $30 million in dividends and reported $300 million of retained earnings in 2015. The retained earnings in 2014 was $230 million. What was the net income of this company in 2015? $120 million $100 million $75 million $118 million No..

Differences between interest rate swap and interest rate cap : What are the differences between an interest rate swap and an interest rate cap? What factors determine the premium (price) for an interest rate cap?

Use interest rate swap to create net fixed rate on the debt : Stagecoaches, Inc. has $100,000,000 in 5-year floating rate debt with an interest rate of LIBOR + 3.0% and quarterly payments. Describe how the firm can use an interest rate swap to create a net fixed rate on the debt. Given the current fixed-rate on..

Forward rate agreement to hedge the interest rate risk : IP Phone, Inc. plans to borrow $80,000,000 for 6 months, three months from now. (In other words, the firm will be getting a 6-month loan in December.) The interest rate on the loan will be LIBOR + 0.75%, but the company is concerned about potential c..

Trading book includes an equity portfolio with market value : A bank's trading book includes an equity portfolio with a market value of $58,000,000. The volatility (standard deviation) of the daily returns is 2.43%. What is the 1-Day 5% Value at Risk for the portfolio?

The relationship between boom and the market : If BOOM inc. has a Beta of 1.3 and the current riskfree rate is 3.5% and the market return is expected to be 11% What is the expected return of BOOM inc stock? What if over the next year the actual market return ended up being 8% what return would yo..

How much would it have to pay at the maturity date : Assume an organization could issue a zero coupon bond at an annual interest rate of 4 percent with semi-annual compounding for 20 years. If it receives $2,264.45 for the bond, how much would it have to pay at the maturity date?

User Account

All Pages