What is the all-in interest rate cost for each of the firms

Assignment Help Financial Management

Reference no: EM131932707

.Assume Alpha desires floating-rate debt and Beta desires fixed-rate debt. Assume that a swap bank is involved as an intermediary and the bank is quoting five-year dollar interest rate swaps at 10.7% - 10.8% against LIBOR flat.

Alpha and Beta Companies can borrow for a five-year term at the following rates:

Alpha Beta

Moody’s credit rating Aa Baa

Fixed-rate borrowing cost 10.5% 12.0%

Floating-rate borrowing cost LIBOR LIBOR + 1%

Calculate the quality spread differential (QSD).

What is the all-in interest rate cost for each of the firms?

How much does the swap bank make (in terms of interest rates)?

How much does each firm save per year?

Assume Alpha and Beta want to borrow $ 100,000,000 for 5 years. Further, the LIBOR rate over the next 5 years is expected to be 7%. Report the net borrowing costs (in dollar terms, not interest rates) for both parties.

Reference no: EM131932707

Questions Cloud

Do we currently have such a supreme court : Separation of powers is one of the most important principles in American government. Why is it important to have a neutral and nonbiased Supreme Court?

Waiting time of customers at restaurant : Assume that the waiting time of customers at this restaurant follow a normal distribution, what is the probability that a simple random sample

Describe how project will allow you to demonstrate program : Describe how this project will allow you to demonstrate each MBA program outcome. The four section titles below refer to the outcomes.

How would you begin to interact with him : What information would you want to know before intervening? After finding out the necessary information, how would you handle this case?

What is the all-in interest rate cost for each of the firms : .Assume Alpha desires floating-rate debt and Beta desires fixed-rate debt. What is the all-in interest rate cost for each of the firms?

Are the services worth the taxpayer costs : Give a brief description of each program, its intended purpose, and target juvenile population. Why do you think they are effective?

The number of long or short futures contracts outstanding : The number of long or short futures contracts outstanding is called the

The differences between the treatment and punishment concept : Build the case for which one you believe has the stronger position based on your research and the crime or criminal justice issue you selected to study.

What is the probability that the sample proportion : A population proportion is 0.57. Suppose a random sample of 658 items is sampled randomly from this population.

User Account

All Pages